Some spring cleaning tips for your investment portfolio

Martin Pelletier: Here are five key factors to look for when determining what’s right for you

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Spring usually brings changes as we emerge from winter hibernation, and the same goes for managing your portfolio, as this time of year tends to be when investors begin to examine their financial situation and clean up before the next tax season.

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Unsurprisingly, this often leads to discussions about how your wealth is managed and whether it’s on track to meet certain financial goals and objectives.

If this is you, here are five key factors to consider when determining what is right for you and whether you have the right team and resources to meet your needs.

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Discretionary Portfolio Manager vs Investment Advisor

Even if you have the time and level of sophistication to take responsibility for your portfolio, you may still want to deploy an investment advisor because the more information you have, the better prepared you can be. A good advisor will provide you with the relevant information and research needed to make sound investment decisions and will challenge you on your ideas.

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That said, many people simply don’t have the time or knowledge to do it themselves and that’s where a good paid discretionary portfolio manager can help. It’s about giving them control of investment decisions, since they will take responsibility for the overall management of your portfolio. However, it will be guided by the rules set out in the investment policy statement, so make sure it fits your goals and risk tolerance.

Size Matters

If you’re wondering why you haven’t heard from your advisor, it’s probably because they have too many clients to serve. Sticking to a minimum investment and turning away clients is a difficult thing for any advisor to do, but a necessity when it comes to maintaining a high level of service.

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To avoid this, conduct a mutual interview to see if there is the right match on both sides and ask if there is an ability to take over your business. A good advisor can also refer you to a colleague if there is none.

Agnostic and flexible approach

Having someone who is non-conflicting, meaning your advisor isn’t just selling you exclusive inside investments, can really help improve performance. Be careful not to confuse this with internal pooled funds, which can improve the efficiency of portfolio management, as the holdings of these funds are not necessarily proprietary in nature and may involve other managers and/or funds traded on the stock exchange.

Some may also prefer a portfolio manager that has the flexibility to allow for some customization or off-the-beaten-track holdings, such as a tactical wallet, or even use highly effective investment vehicles such as structured notes.

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Managing risk alongside returns

It is not uncommon to look at things in absolute terms against one or more particular benchmarks when evaluating performance. This creates two problems: the selection of the benchmark and the risk taken to generate the return.

We really like the goal-based benchmarking approach, complemented by an active risk management process. This means that a target return is set to achieve a set of goals or objectives and risk is minimized as much as possible in trying to achieve it.

Taxation and wealth planning

Finally, a planning-based approach is essential in managing any portfolio. This will become a determining factor in the years to come, especially in an environment of persistent deficit spending and where governments are looking for ways to support it through increased taxation.

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Developing an advanced estate plan should include more than a projection of future cash flows and start discussions on tax strategy, will and estate planning.

Like any good old-fashioned spring cleaning, having a to-do list and sticking to it can really help get things done, so you can relax and start enjoying the sun and warmth knowing that everything is taken care of.

Martin Pelletier, CFA, is a Senior Portfolio Manager at Wellington-Altus Private Counsel Inc, trading as TriVest Wealth Counsel, a private client and institutional investment firm specializing in risk-managed discretionary portfolios, audit /investment monitoring and advanced tax, estate and wealth planning.


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