Wednesday, August 6, 2014

A Case For Consolidation

Are you putting all of your financial eggs in one basket?

There is that old saying don't put all your eggs in one basket BUT in this blog post we want you to reconsider that old adage. Sometimes there is something to be said for putting many eggs in one  basket.  Several studies have shown an overwhelming majority of investors intend to consolidate all their assets with a single adviser upon retirement. As noted in a recent Globe and Mail article, "According to the World Wealth Report 2013 from Capgemini and RBC Wealth Management, 55 per cent of Canadians who had $1-million or more in investible wealth said they preferred to work with only one firm to manage all their finances. Only 13 per cent wanted to deal with multiple firms." The article discusses the benefits of consolidation. The idea of consolidation really comes down to simplifying your financial plan, again it is the idea of putting many, diverse eggs in one basket.


There are a number of key takeaways from the Globe and Mail article. 

1.      From a client-perspective,  there is the benefit of simplifying your life and financial affairs.

a.      Maintaining multiple accounts can be a daunting endeavor; there’s onerous paperwork, stress and even the possibility of losing the money altogether – particularly after a move or in old age.

b.      This danger becomes particularly pronounced at tax time when it is easy to misplace one of the myriad tax slips issued by investment companies.

c.       By consolidating your accounts, you reduce your time requirements. It is simple time-math really. If you have to see two or three different advisers every time you need to make a change to your financial plan that would be very time consuming. Think about the one and done theory.

2.      The ‘Big Picture’ view

d.      Overall, it becomes very difficult to get a clear sense of how your investments are performing if they’re scattered around many different places

e.      From an adviser’s perspective it’s also tougher to give a client the best advice that matches his or her financial profile if they don’t know what other advisers might be recommending – investment positions might be duplicated or two conflicting strategies might be implemented

3.      To be sure, there can be obstacles to implementing this consolidation, though even here strategies can be undertaken to help

f.      Non-registered accounts can be particularly tricky if there are large embedded capital gains; if you are  forced to liquidate such a position it can lead to a monumental tax bill at the end of the year.

g.      Sometimes, it is possible to transfer in-kind, though proprietary products that have to be liquidated can stand in the way of this strategy.

h.        Finally, there can be some good reasons to maintain separate advisers, such as when they have separate areas of expertise.  As the article states “the one you rely on for advice on registered accounts or insurance can’t help you with buying or selling stock." 

It really comes down to doing what is best for you, the client/investor.  Simplifying your financial plan and consolidating all your accounts and products with one adviser can make life easier and help you create a solid, cohesive plan to help you reach your goal of financial freedom. The best thing to do, if you think consolidation is the best approach for you, is to talk to a financial adviser.

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