High Net Worth? Get Thee To An Advisor!

Asset allocation, risk, diversification and rebalancing. Pros/cons of hiring a financial advisor. Seeking advice on your portfolio?
Post Reply
User avatar
Descartes
Veteran Contributor
Veteran Contributor
Posts: 1856
Joined: 03 Nov 2008 09:59

High Net Worth? Get Thee To An Advisor!

Post by Descartes »

Canada is home to 282,000 high-net-worth (HNW) individuals, those with $1-million (U.S.) or more of investable assets. Canadians who have recently joined this affluent group may discover that their approach to personal finance has not kept pace with their rising net worth, and the group has attracted a number of professionals dedicated to helping them manage their money.
Like benevolent vultures?
Invariably, HNW individuals will need advice on how to invest their wealth.
erm?
The management fees are typically 1% to 2% of the assets under management and are usually tax-deductible. Additional fees may be charged for trading commissions and for the safe custody of client holdings at a third-party financial institution. The overall cost is often lower than the fees of mass-market financial advisers.
Well then.. that sounds like a bargain.
Once a client agrees upon an investment plan, the manager has total discretion to decide how the client’s money is invested.
Sign me up! How about you?

More top flight helpful advice from your Globe and Mail
"A dividend is a dictate of management. A capital gain is a whim of the market."
User avatar
Shakespeare
Veteran Contributor
Veteran Contributor
Posts: 23396
Joined: 15 Feb 2005 23:25
Location: Calgary, AB

Re: High Net Worth? Get Thee To An Advisor!

Post by Shakespeare »

A million isn't really that H as far as HNW goes. IIRC the median of the top quintile (i.e. top 10%) is around 900 K total (which includes house and perhaps also pension).
Sic transit gloria mundi. Tuesday is usually worse. - Robert A. Heinlein, Starman Jones
User avatar
Bylo Selhi
Veteran Contributor
Veteran Contributor
Posts: 29494
Joined: 16 Feb 2005 10:36
Location: Waterloo, ON
Contact:

Re: High Net Worth? Get Thee To An Advisor!

Post by Bylo Selhi »

Shakespeare wrote:A million isn't really that H as far as HNW goes. IIRC the median of the top quintile (i.e. top 10%) is around 900 K total (which includes house and perhaps also pension).
TFA sez, "Canada is home to 282,000 high-net-worth (HNW) individuals, those with $1-million (U.S.) or more of investable assets." AFAIK that generally excludes principal residence and DB pensions. These days with the average house valued at $500k in Tronno and $1M+ in West Van, almost everyone in those areas can be a millionaire if they include their principle residence.
Sedulously eschew obfuscatory hyperverbosity and prolixity.
Taggart
Veteran Contributor
Veteran Contributor
Posts: 6893
Joined: 05 Dec 2005 07:34

Re: High Net Worth? Get Thee To An Advisor!

Post by Taggart »

Bylo Selhi wrote: These days with the average house valued at $500k in Tronno and $1M+ in West Van, almost everyone in those areas can be a millionaire if they include their principle residence.
Yabbut for how much longer? Oh yeah I almost forgot, real estate prices always rise. Good thing I ignore what's happened to real estate prices in Japan, Europe and the U.S. Then again the average Canadian isn't over-leveraged in mortgage or consumer debt, are they? :twisted:
User avatar
ghariton
Veteran Contributor
Veteran Contributor
Posts: 15954
Joined: 18 Feb 2005 18:59
Location: Ottawa

Re: High Net Worth? Get Thee To An Advisor!

Post by ghariton »

The fact that many of these financial advisers are interested only in how much someone has in investible assets, and not in their net worth, speaks volumes.

These are salespeople, not advisers. They just want to know the potential size of their commission.

George
The juice is worth the squeeze
User avatar
freedom_2008
Contributor
Contributor
Posts: 841
Joined: 16 Nov 2010 17:46
Location: Victoria

Re: High Net Worth? Get Thee To An Advisor!

Post by freedom_2008 »

Bylo Selhi wrote:
Shakespeare wrote:A million isn't really that H as far as HNW goes. IIRC the median of the top quintile (i.e. top 10%) is around 900 K total (which includes house and perhaps also pension).
TFA sez, "Canada is home to 282,000 high-net-worth (HNW) individuals, those with $1-million (U.S.) or more of investable assets." AFAIK that generally excludes principal residence and DB pensions. These days with the average house valued at $500k in Tronno and $1M+ in West Van, almost everyone in those areas can be a millionaire if they include their principle residence.
Also it is per person, not per household. So for a household with two people, the HNW needs to be above 2M, excludes principal residence and DB pensions. Also agree totally with George.
User avatar
Rickson9
Contributor
Contributor
Posts: 669
Joined: 05 Apr 2011 00:00

Re: High Net Worth? Get Thee To An Advisor!

Post by Rickson9 »

Bylo Selhi wrote:AFAIK that generally excludes principal residence and DB pensions.
+1. This.

It's kind of ridiculous to include your principal residence anyway.

As a somewhat unrelated aside, it is my personal belief that diversification, asset allocation and re-balancing are the primary reasons most individuals, outside of those getting extremely high pay, need decades to get to $1M (if they get there at all). I was lucky on many levels, but one was to be brain-washed with a different set of metrics when I was a teenager.
"We don't see things as they are, we see them as we are." - Anais Nin
User avatar
Bylo Selhi
Veteran Contributor
Veteran Contributor
Posts: 29494
Joined: 16 Feb 2005 10:36
Location: Waterloo, ON
Contact:

Re: High Net Worth? Get Thee To An Advisor!

Post by Bylo Selhi »

Rickson9 wrote:it is my personal belief that diversification, asset allocation and re-balancing are the primary reasons most individuals, outside of those getting extremely high pay, need decades to get to $1M (if they get there at all).
-1 This.

The primary reason why most people don't get to $1M, even after decades, is simply that they don't save enough. A secondary reason is that some of those who do save enough then speculate with it rather than get rich slowly (but far more surely) through a decades-long investment program of "diversification, asset allocation and re-balancing."
I was lucky on many levels
So it would seem ;)
Sedulously eschew obfuscatory hyperverbosity and prolixity.
User avatar
deaddog
Veteran Contributor
Veteran Contributor
Posts: 3422
Joined: 19 Jan 2008 19:59
Location: Central BC/Arizona

Re: High Net Worth? Get Thee To An Advisor!

Post by deaddog »

ghariton wrote:The fact that many of these financial advisers are interested only in how much someone has in investible assets, and not in their net worth, speaks volumes.

These are salespeople, not advisers. They just want to know the potential size of their commission.

George
This might not be high net worth but probably a typical meeting with an advisor.

http://www.xtranormal.com/watch/7743951 ... al-advisor
Last edited by deaddog on 06 Nov 2011 23:27, edited 1 time in total.
"And the days that I keep my gratitude higher than my expectations, well, I have really good days" RW Hubbard
User avatar
Rickson9
Contributor
Contributor
Posts: 669
Joined: 05 Apr 2011 00:00

Re: High Net Worth? Get Thee To An Advisor!

Post by Rickson9 »

Decades (if not a century or two) are needed if an individual practices diversification, asset allocation and re-balancing. These practices are sold (and subscribed to) by the masses by financial institutions/planners and are detrimental to wealth building. It is only luck that I was able to avoid similar brain-washing. My opinion only and based solely on nothing but personal experience.
"We don't see things as they are, we see them as we are." - Anais Nin
User avatar
AltaRed
Veteran Contributor
Veteran Contributor
Posts: 33398
Joined: 05 Mar 2005 20:04
Location: Ogopogo Land

Re: High Net Worth? Get Thee To An Advisor!

Post by AltaRed »

Rickson9 wrote:It is only luck that I was able to avoid similar brain-washing. My opinion only and based solely on nothing but personal experience.
Individual luck is hardly relevant to the financial education and development of investing skills by the population at large. This forum's purpose is to further appropriate education and knowledge for the bulk of the population who, as Bylo says, does not save enough to invest in a methodical way. I would argue it is a disservice to continue repeating stories of luck and speculation when the odds of success are the same as a minor leaguer hitting a home run against the Cards' pitching staff.
Imagefiniki, the Canadian financial wiki The go-to place to bolster your financial freedom
User avatar
Bylo Selhi
Veteran Contributor
Veteran Contributor
Posts: 29494
Joined: 16 Feb 2005 10:36
Location: Waterloo, ON
Contact:

Re: High Net Worth? Get Thee To An Advisor!

Post by Bylo Selhi »

Rickson9 wrote:Decades (if not a century or two) are needed if an individual practices diversification, asset allocation and re-balancing.
Proof please. As counter evidence I offer several people I know who did it in less.
These practices are sold (and subscribed to) by the masses by financial institutions/planners and are detrimental to wealth building.
Your observation may be simply explained by the deleterious effects of the 3%+ annual drag they introduce by way of fees.

You're also ignoring the documented fact that many investors who claim to follow the program, don't. Consider the panic that ensues by investors, their advisors and their mutual fund managers every time there's a crisis such as the European financial crisis now in progress.
Sedulously eschew obfuscatory hyperverbosity and prolixity.
dusty2
Contributor
Contributor
Posts: 511
Joined: 11 Nov 2006 21:11
Location: burlington

Re: High Net Worth? Get Thee To An Advisor!

Post by dusty2 »

The number one priority of an advisor is to get his hands on your money as quickly as possible. That means he'll create some plan after finding out how gullible the investor is, which creates the maximum amount he can put in his pocket. You won't get any no-loads, but a bunch of those 10% 'off the top', front loads he'll pay to himself and the guys he works with. The investor will also be paying for everyone's drinks and a meal at a fancy restuarant, while they have a good laugh.
User avatar
deaddog
Veteran Contributor
Veteran Contributor
Posts: 3422
Joined: 19 Jan 2008 19:59
Location: Central BC/Arizona

Re: High Net Worth? Get Thee To An Advisor!

Post by deaddog »

Bylo Selhi wrote:
Rickson9 wrote:Decades (if not a century or two) are needed if an individual practices diversification, asset allocation and re-balancing.
Proof please. As counter evidence I offer several people I know who did it in less.
Look at his record over the last 12 years on his web site.

Show us someone who beat that record by practicing a rebalance a diversified asset allocated portfolio strategy.
"And the days that I keep my gratitude higher than my expectations, well, I have really good days" RW Hubbard
User avatar
AltaRed
Veteran Contributor
Veteran Contributor
Posts: 33398
Joined: 05 Mar 2005 20:04
Location: Ogopogo Land

Re: High Net Worth? Get Thee To An Advisor!

Post by AltaRed »

deaddog wrote:
Bylo Selhi wrote:
Rickson9 wrote:Decades (if not a century or two) are needed if an individual practices diversification, asset allocation and re-balancing.
Proof please. As counter evidence I offer several people I know who did it in less.
Look at his record over the last 12 years on his web site.

Show us someone who beat that record by practicing a rebalance a diversified asset allocated portfolio strategy.
That is not the point nor the question. Bylo asked him to prove it takes decades (if not centuries) to get to the end point using tried and true diversification, asset allocation and re-balancing techniques. How Rickson9 did it is not relevant to anyone else... after all, his success is a reflection of himself... with doses of good luck.
Imagefiniki, the Canadian financial wiki The go-to place to bolster your financial freedom
User avatar
deaddog
Veteran Contributor
Veteran Contributor
Posts: 3422
Joined: 19 Jan 2008 19:59
Location: Central BC/Arizona

Re: High Net Worth? Get Thee To An Advisor!

Post by deaddog »

AltaRed wrote:That is not the point nor the question. Bylo asked him to prove it takes decades (if not centuries) to get to the end point using tried and true diversification, asset allocation and re-balancing techniques. How Rickson9 did it is not relevant to anyone else... after all, his success is a reflection of himself... with doses of good luck.
What is the end point? What is the starting point.
Ricksons graph on his website strarts at $10000 ends up after 12 years at north of $60000.
Can you get there using tried and true?
"And the days that I keep my gratitude higher than my expectations, well, I have really good days" RW Hubbard
User avatar
newguy
Veteran Contributor
Veteran Contributor
Posts: 8088
Joined: 10 May 2009 18:24
Location: Montreal

Re: High Net Worth? Get Thee To An Advisor!

Post by newguy »

deaddog wrote:Ricksons graph on his website strarts at $10000 ends up after 12 years at north of $60000.
Can you get there using tried and true?
Uhh are you sure the numbers are right? Then yes I see many people ending up there. Some after saving a year or two of salary.

newguy
User avatar
AltaRed
Veteran Contributor
Veteran Contributor
Posts: 33398
Joined: 05 Mar 2005 20:04
Location: Ogopogo Land

Re: High Net Worth? Get Thee To An Advisor!

Post by AltaRed »

deaddog wrote:What is the end point? What is the starting point.
Ricksons graph on his website strarts at $10000 ends up after 12 years at north of $60000.
Can you get there using tried and true?
On a straight investment portfolio basis, it matters not what Rickson may have done since the vast majority of people do not have the personality traits espoused by Rickson9 nor his sheer luck. The odds of repeatability for Joe Q Public are the same as getting hit by a Freightliner in the high arctic.

As Newguy suggests, many people can get there with a prudent investment plan plus disciplined saving and investing. Almost my entire net worth outside of my principal residence was acheived in 16 years and I did not try to hit home runs from the ball park. A good portion of the middle clase could do also.
Imagefiniki, the Canadian financial wiki The go-to place to bolster your financial freedom
User avatar
Bylo Selhi
Veteran Contributor
Veteran Contributor
Posts: 29494
Joined: 16 Feb 2005 10:36
Location: Waterloo, ON
Contact:

Re: High Net Worth? Get Thee To An Advisor!

Post by Bylo Selhi »

AltaRed wrote:it matters not what Rickson may have done since the vast majority of people do not have the personality traits espoused by Rickson9 nor his sheer luck... many people can get there with a prudent investment plan plus disciplined saving and investing. Almost my entire net worth outside of my principal residence was acheived in 16 years and I did not try to hit home runs from the ball park. A good portion of the middle clase could do also.
:thumbsup:

Most of us get to do this only once. If we didn't succeed by the time we reach late middle age then we'll likely never have enough time to try again. For that reason alone, I'd rather get rich slowly, deliberately and with a very high probability of success using a disciplined program of saving and investing rather than depend on my luck to do it more quickly through speculation with a substantial probability of failure.
Sedulously eschew obfuscatory hyperverbosity and prolixity.
User avatar
deaddog
Veteran Contributor
Veteran Contributor
Posts: 3422
Joined: 19 Jan 2008 19:59
Location: Central BC/Arizona

Re: High Net Worth? Get Thee To An Advisor!

Post by deaddog »

AltaRed wrote: On a straight investment portfolio basis, it matters not what Rickson may have done since the vast majority of people do not have the personality traits espoused by Rickson9 nor his sheer luck. The odds of repeatability for Joe Q Public are the same as getting hit by a Freightliner in the high arctic.
Cannot the vast majority learn from Ricksons example? He has a sound strategy for seeking value. I chalk it up to more than luck that he has achieved the returns he has.

If you have the discipline to adhere to the strategy, it should do better than the diversified asset allocation model.

If you don’t have the discipline to adhere to a strategy, any strategy, you are more than likely doomed to failure.

Personally I don’t like Ricksons strategy because of the lack of risk control. I agree with the value part but think there should be some mechanism to cull stocks that don’t meet the original criteria for value stocks. My opinion only. :wink:
As Newguy suggests, many people can get there with a prudent investment plan plus disciplined saving and investing. Almost my entire net worth outside of my principal residence was acheived in 16 years and I did not try to hit home runs from the ball park. A good portion of the middle clase could do also.
A prudent investment plan and disciplined adherence to that plan certainly work. I was dead broke and in debt at 35. Retired at 55 and have continued to grow my net worth since then. No asset allocation, a little diversification, and making lots of mistakes I hopefully learned from.
"And the days that I keep my gratitude higher than my expectations, well, I have really good days" RW Hubbard
User avatar
AltaRed
Veteran Contributor
Veteran Contributor
Posts: 33398
Joined: 05 Mar 2005 20:04
Location: Ogopogo Land

Re: High Net Worth? Get Thee To An Advisor!

Post by AltaRed »

deaddog wrote:[Cannot the vast majority learn from Ricksons example?
Not a chance as FW Forum members do not resemble Joe Q Public in the remotest sense nor does Joe have much, if any, interest. That latter point is simply plain reality. Sticking some money in their bank offered RRSP and/or TFSA and/or RESP is as close as it gets for the 90%ers.... and their financial advisor is their bank rep. Getting caught up with IG, Edward Jones or a full service broker is probably the giant leap for the bulk of the remaining 10%. The rest of us are in the 1-2% of the population. Education in and adoption of standard diversification, asset allocation and re-balancing practices is as good as it gets.
Imagefiniki, the Canadian financial wiki The go-to place to bolster your financial freedom
User avatar
Bylo Selhi
Veteran Contributor
Veteran Contributor
Posts: 29494
Joined: 16 Feb 2005 10:36
Location: Waterloo, ON
Contact:

Re: High Net Worth? Get Thee To An Advisor!

Post by Bylo Selhi »

deaddog wrote:He has a sound strategy for seeking value. I chalk it up to more than luck that he has achieved the returns he has... Personally I don’t like Ricksons strategy because of the lack of risk control.
Perhaps I misunderstand but it sounds to me that you're contradicting yourself. If Rickson "has a sound strategy for seeking value" and "[you] chalk [his success] up to more than luck" then how do you reconcile that with his "lack of risk control"? Lack of risk control means that a bout of less than stellar luck could have or still can destroy his portfolio. That doesn't sound like a very "sound strategy" to me.
A prudent investment plan and disciplined adherence to that plan certainly work.
Exactly. It's also more likely to work successfully than more speculative, active approaches. For some of us it's worth setting aside a higher percentage of our income to implement a passive investment plan than we might have to set aside to implement a more active plan. The "value" in doing that is that we incur less risk, i.e. enjoy a greater likelihood of achieving success.
I was dead broke and in debt at 35. Retired at 55 and have continued to grow my net worth since then. No asset allocation, a little diversification, and making lots of mistakes I hopefully learned from.
Congratulations. But be aware that just because you can do it doesn't mean that everyone, or even many, can do it. And just because you did it doesn't mean that others who follow your methodology are guaranteed to do as well as you did.
Sedulously eschew obfuscatory hyperverbosity and prolixity.
User avatar
newguy
Veteran Contributor
Veteran Contributor
Posts: 8088
Joined: 10 May 2009 18:24
Location: Montreal

Re: High Net Worth? Get Thee To An Advisor!

Post by newguy »

Bylo Selhi wrote:
I was dead broke and in debt at 35. Retired at 55 and have continued to grow my net worth since then. No asset allocation, a little diversification, and making lots of mistakes I hopefully learned from.
Congratulations. But be aware that just because you can do it doesn't mean that everyone, or even many, can do it. And just because you did it doesn't mean that others who follow your methodology are guaranteed to do as well as you did.
It also sounds suspiciously like a 20 year bull market. Congratulations on being born at the right time.

newguy
User avatar
Descartes
Veteran Contributor
Veteran Contributor
Posts: 1856
Joined: 03 Nov 2008 09:59

Re: High Net Worth? Get Thee To An Advisor!

Post by Descartes »

Bylo Selhi wrote:
A prudent investment plan and disciplined adherence to that plan certainly work.
Exactly. It's also more likely to work successfully than more speculative, active approaches. For some of us it's worth setting aside a higher percentage of our income to implement a passive investment plan than we might have to set aside to implement a more active plan.
I like the sneaky way you redefined "prudent" and "disciplined" as a "passive investment plan". ;)
Not sure all would agree....not that I agree with some of the foolishness stated above either.
"A dividend is a dictate of management. A capital gain is a whim of the market."
User avatar
Shakespeare
Veteran Contributor
Veteran Contributor
Posts: 23396
Joined: 15 Feb 2005 23:25
Location: Calgary, AB

Re: High Net Worth? Get Thee To An Advisor!

Post by Shakespeare »

"Prudent" and "Disciplined" means paying attention to risks - not necessarily passive.
Sic transit gloria mundi. Tuesday is usually worse. - Robert A. Heinlein, Starman Jones
Post Reply