How are Wealth Managers paid?

Note: The information in square brackets describes audiovisual content other than dialogue or narration.

[Music]

[Light yellow text on beige background: Investment advisor compensation plans]

[Soft jazz music]

[Image: Front-angle waist shot of a man wearing a shirt.]

[Text on right side of screen superimposed on part of the green Desjardins logo: Xavier-Laurens Amany, B.B.A., Associate Advisor, Brossard Group, Desjardins Securities]

Xavier-Laurens Amany: It’s often said that not hiring a professional can end up costing you a lot more in the end.

This is especially true when it comes to your finances.

Because there are so many financial products out there, and because the rules surrounding them are complicated and constantly changing, it’s best to rely on an expert.

Up until 2017, the advisors and firms that offered these types of services were not required to systematically disclose how much their services cost.

Now, however, in the interest of openness and honesty, the investment fees paid during the year and the rate of return are very clearly indicated on the statements.

This is good news, because having better insight into how your advisor is paid helps to drive home the point that they have your best interests at heart.

[Light yellow text superimposed on a man: Working for you. Salary.

Fees. Commission.]

Xavier-Laurens Amany: There are several different types of advisor compensation plans, including salary, fees and commission.

First, there’s a salary. Many advisors earn a salary. They are usually employed by a financial institution.

Note that their financial institution generally pays them bonuses on the sale of certain financial products.

This can sometimes limit the range of products they can offer you.

On the other hand, because they always work with the same product families, they get to know them inside out.

[Image: Waist shot, 3/4 profile, of a man in a shirt sitting on a stool. There is a tripod in the foreground to the right.]

Xavier-Laurens Amany: Second, there’s commission.

Under this type of compensation plan, advisors are paid a commission, often a percentage of the value of the investment, on each transaction you make through them.

[Image: Front-angle waist shot of a man in a shirt]

Xavier-Laurens Amany: Third, there are management fees.

This compensation plan is based on the payment of management fees, namely a percentage of the annual fees determined based on the total value of your portfolio.

[Image: Left-angle waist shot of a man in a shirt]

[Light yellow text on the right superimposed on the image: $250,000
in investments, total fees = $3,750]

[Image: Right-angle waist shot of a man in a shirt]

Xavier-Laurens Amany: For example, if you have $250,000 in investments, the total fees would be $3,750, or 1.5%.

[Light yellow text superimposed on the right: The higher the assets under management, the lower the fees. Total fees = $3,750]

Xavier-Laurens Amany: Interestingly, the more assets you have under management, the less fees you will pay.

This type of compensation is becoming the new industry standard and is the best way to ensure that advisors are working in their clients’ best interests.

In fact, since the advisor’s compensation is based on the assets under management, both the advisor and the client are equally invested in seeing the assets grow.

[Light yellow text centred on screen, superimposed on a man: Helps avoid conflicts of interest]

Xavier-Laurens Amany: This helps to avoid conflicts of interest and vastly improves the relationship of trust between advisor and client.

[Image: Waist shot, 3/4 profile, of a man in a suit sitting on a stool. There is a tripod in the foreground to the right.]

[Light yellow text superimposed in the centre of the screen: Ask the right questions]

Xavier-Laurens Amany: As with any client relationship, it’s also important to ask the right questions before hiring a professional.

Have a list of questions to ask the various advisors you meet with.

It could be interesting to compare their answers.

Some of the best questions to ask include:

How are you paid?

Are your fees the same for the different types of securities, for example stocks and bonds? (Note: The fees are often lower on bonds.)

Can my family get the same management fees? (Note: A family member living at the same address will often pay the same management fees.)

[Image: Front-angle waist shot of a man in a shirt]

Xavier-Laurens Amany: Transparency. As we’ve seen, it’s only been mandatory in the past few years in Canada to clearly disclose all fees associated with managing your portfolio. And that’s something we need to take advantage of.

When you receive your monthly or quarterly statement, read it carefully and study the contents.

Are the returns high enough to justify the management fees?

Several studies show that management fees have a major impact on long-term returns, significantly affecting the amounts accumulated in investment vehicles.

[Image: Left-angle waist shot of a man in a shirt]

[Light yellow text superimposed to the right of the man: Quality]

Xavier-Laurens Amany: The size of the management fees shouldn’t be overlooked, but we also can’t lose sight of the quality of the advice and service provided.

If your advisor helps you achieve your financial goals through solid returns or sound tax advice, this can be worth its weight in gold.

[Light yellow text centred on beige background: Brossard Group, Desjardins Securities. Xavier-Laurens Amany, Brossard Group, 1 Place Ville-Marie, Suite 1970, Montréal (Québec)]
 
[Image: Desjardins logo]

[Text on screen: Wealth Management, Securities]

[White text on black background: Warning. Each Desjardins Securities advisor named on the front page of this document or at the beginning of any subsection hereof certifies that the recommendations and opinions expressed herein accurately reflect their personal views about the companies and securities that are the subject of this publication and all other companies and securities mentioned in this publication that are monitored by the advisor. Desjardins Securities may have published opinions that are different from or even run counter to those expressed in this document.  These opinions reflect the different points of view, assumptions and analytical methods of the advisors who wrote them. Before making an investment decision based on any recommendations made in this document, the recipient should consider whether such recommendations are appropriate, given the recipient’s particular investment needs, objectives and financial circumstances.

End of text transcription