Searching for a new Advisor? – Ask them about their Personal compensation

Published by on

I met with a prospective client the other day who found me through social media. He stated that he has been reading and enjoying my blogs regularly. It was great to find out that my work is appreciated. I believe in teaching clients more than they knew when we started. At one time I wrote a weekly column for three years in a local paper. I enjoy bringing a different look to investing than most people write about.

Two Portfolios – Hundreds of Clients

This prospective client pointed out that he has met with two others in the industry who stated that they also treat each individual client as an individual. He became suspicious of them treating each one separately as they both were able to quote their exact returns for a growth client’s portfolio and also for an income portfolio. Only two returns for hundreds of clients. When he pointed this out to them they both still claimed to treat each client as an individual, yet continued to have only two returns to quote.

 If you have been reading my blogs you will see that I also state that I value each and every client as an individual. I craft each and every client’s portfolio to suit them. I asked him of either of these clients acted as portfolio managers who do all the trading in the account, without checking with the client for each trade. He said one told him this was how he ran his practice, but the second one did not state either way, but made it clear he expects to be listened to.

What happened to individuality?

I pointed out that they are probably each running two portfolio’s (a Growth and an Income) and they put their clients in to one or both of these. This is the only way an advisor/portfolio manager can make their system work. They are provided a platform by their head office that allows them to post a buy or sell trade for all clients at once. All clients will have the same trade, in exactly the same percentage as the advisors’ other clients. These are simply mutual funds run by a local advisor. You have to ask yourself; Am I getting the best?

These advisors are the very same ones who speak badly about any and all mutual funds. These are the same advisors who also put their smaller clients into separately managed portfolios: not pointing out that these separately managed portfolios are also mutual funds. These portfolios show you your investments listed separately as opposed to a unit price as a mutual or a segregated fund does. They don’t tell their clients that they are choosing from about 16 choices of funds, not the 10,600 choices that they would have with mutual funds (Click here for my blog on how to pick Mutual Funds). They also don’t tell their clients that they personally get paid more money to sell you these two types of investing than they would if they sold you regular mutual funds.

Please click here to read my blog ‘What’s the Point’ about these last two styles.

Those who know me are aware of the passion I have when discussing fees and all client costs. When I work with my clients they not only know what they pay, they also know how much is in it for me. Quite a different number than you would imagine. A client should know the bottom line of the advisor’s personal compensation. Knowing what flows through to the advisor can show you what drives the advisor’s advice and decisions.

Behaviour Modification

A past regional manager of mine at another institution stated in a meeting “don’t tell me behaviour modification doesn’t work”. He was talking about the fact that when they made sure advisors personally made more from certain proprietary products, the majority started to sell these products. He was showing us that the most growth in the company was happening in these products. Of course these are the products that also make the institution more money.

This prospective client knew what he was being told did not match reality. Good for him. As you can imagine he is now putting me through my paces making sure that I am what I purport to be. Again – Good for him.

If you want to see what a truly independent investment/insurance advisor can do for you, call me at 905-846-9060, ext.3838, email me at or visit my website at