Thank you very much for your question.
The information above provides a substantial amount of information about your existing investment portfolios, but contains very little information about your:
- Personal/investment goals, risk tolerance and return expectations over time horizon;
- Career plans and retirement date; and
- Inheritance aspirations/estate (although you are currently single, with no dependents or debt).
Financial advice, however, must take into account the client’s clearly defined personal financial goals. The investment and portfolio structure may change as the client’s objectives/situation change. As such, my answer won’t go into the level of detail you desire. However, I will offer a few observations you should keep in mind when it comes to portfolio building in general and financial advice in particular.
One of the questions I was asked when reading your original question was, “If investment values according to your original question increased tenfold, as it would one day, your goal would be- is it always about cost savings, or is it more about risk management/peace of mind?” So I added a zero to all the amounts you provided in my answer, so that our wider audience can take that into account. The point I want to emphasize with larger investment amounts is that individuals generally need the advice of a trusted specialist to enjoy peace of mind during retirement.
Although a lot of “free” investment advice can be found, they are (by their nature) only offered piecemeal. It offers a great way to educate yourself, but the danger is that answers that make a lot of sense individually still won’t help the investor plan holistically. It takes an experienced financial advisor to put all those pieces together for their clients… It’s comparable to building a quality wall versus building a quality house.
So, by focusing only on the cost component, you risk doing yourself a disservice in the long run.
Reputable institutes (including the Investment Funds Institute of Canada) and others such as Dalbar, Morgan Stanley, Vanguard and Coronation locally, have concluded that disciplined and “leading” financial advice delivers excess returns from 1.5 to 3% per year (after fees) to their clients. In short, don’t fall into the trap of thinking that successful investing is just about cutting costs. This is not the case.
However, I believe your financial acumen puts you in an excellent position to identify an advisor who can add value beyond their advisory fees. This will give you the confidence you need so you can instead focus on becoming an expert in your area of expertise and focus on your retirement goals during your retirement.
It is difficult to comment on the existing portfolio because no corresponding financial objectives are mentioned, apart from costs and the rationalization of cash.
Cash, in my opinion, is a form of payment and should only be held for known obligations within 24 months. So it’s not an investment.
What rings true for me here is that “there is beauty in sophisticated simplicity”. Spreading your investment capital over more than one director does not necessarily improve diversification or reduce your risk. You should also consider the allocation of underlying investment instruments and the various investment styles of the managers. Despite using different managers, your underlying investments may behave more similarly than you think!
The dispersion of capital via more than one director can become:
- An administrative, management and succession nightmare; and
- Investing suboptimally from an administration cost perspective (economy of scale). Fees are not only levied at the advice level, but also by the product administrator (and in the funds). Therefore, it is very important to ensure that your administration/asset management fees (eg performance fees on some of your funds) are reasonable.
Portfolio management, in my view, takes place best in a “fund-of-funds” investment portfolio structure, where financial instruments are constantly valued (and traded, if necessary) by professional asset managers. Portfolio changes in these portfolios are made by unbiased/emotionless investment specialists (financial analysts) who constantly weigh the risks versus the rewards. Fund changes within a fund-of-funds structure have no capital gains tax implications for the client.
When it comes to financial planning, we all “just don’t know what we don’t know” outside of our areas of expertise. Although we may think of financial planning as an expense, research shows that it is an expense that pays for itself. The trick, however, is to find a financial advisor who adds value, who you can build a long-term relationship with, and who provides the necessary peace of mind – priceless today.