Folks, it’s time to break out your fluorescent orange safety vests and get ready for hunting season. Across the country, bank employees are flipping through lists of RRSP leads, and – if you any products at all with the bank – your name is on one of those lists.
Normally, of course, an orange vest is supposed to distinguish between the hunter and huntee, and you – dear Mr. or Mrs. Client – are definitely the latter.
Related: 5 common myths about RRSPs
If you don’t receive a “Hi, Mr. Client, it’s Bank Employee McBankerson here at your local branch, and I’m just calling to book some time with you to discuss this year’s RRSP contribution” phone call this year, it’s because the person to whom you were assigned chickened out, was fired, or had one (or more) of their digits severed in a tragic dialing accident. And – whatever the reason – they’ll be answering to their manager (and their manager’s manager) about it later.
Your RRSP dollars are a trophy that every institution you deal with wants to hang on their wall. Your job is to find the wall that’s most appropriate to hang on, and not fall to the first shot fired by the hunter who spots you quickest.
Hyperbolic? Definitely, but I’m not overstating the case by as much as you might think. Contributing to your RRSP isn’t a bad thing, provided you’ve thought it through. An RRSP at a bank is better than nothing at all, even if you end up paying punitively high fees for a portfolio filled with overlapping funds suggested by successive advisors without any thought to how they fit together or contribute to *your* bottom line. A low-fee, well-diversified, regularly-rebalanced portfolio is unequivocally best of all.
This year, if you’ve thought through the RRSP vs. TFSA decision given your present and anticipated income, I want you to do something for me: If your RRSP is at the bank and you were going to go there by default, plan on going twice.
Think of your first visit as a job interview. The person across the desk from you might be competent and experienced but under lots of pressure to sell the flavour of the month fund. She might be competent and experienced and immune to sales pressure from above. She might be incompetent, inexperienced, or both. You might not be able to tell the difference. Your job on this visit is to ask a lot of questions and listen to her answers. That’s all.
This visit is also a research trip. You’re collecting facts about the investments recommended to you: what they are, how they fit together, how much they cost, and why these funds in particular are the ones being recommended. This research, in particular, is why I want you to make two trips.
I know the exact feeling you have when – at the end of ten minutes of chat, fifteen minutes of questions about your risk tolerance and net worth, and twelve more minutes of name, address, and date of birth minutiae – you’re presented with disclosure documents and expected to sign the account agreement while they’re still wet from the printer. You don’t want to waste any more time, you don’t want to ask any more questions, and you especially don’t want to sound like you don’t understand what she’s talking about.
I don’t want you to have that feeling. I want you to know from minute one of the meeting that you will pay attention, ask questions, and consider carefully everything presented to you…and then walk away, fund fact sheets and prospectus in hand, to make the decision only after you’ve had some time to think.
This thinking should take place in front of a computer. With the fact sheets for each individual fund you own and any new ones that were recommended to you, head over to GetSmarterAboutMoney.ca.
Start with their fund facts interactive sample, which will help you navigate the ones you have in your hands. Move on to any articles about mutual funds that catch your eye, and don’t forget to stop at the fee calculator.
Remember, you’re not looking for a fund that’s done spectacularly well in the past, you’re looking for a portfolio that is diversified across countries and types of companies, balanced across stocks and bonds in a way that you’re truly comfortable with, and has low enough costs that one-third of your lifetime returns aren’t going to be eaten up in fees.
Related: Robo-advisor battle royale
Has your perception of your advisor’s competence, experience, and sensitivity to sales pressure changed? Is she worth going back to? Or do you need to start thinking about interviewing alternatives, places like Wealthsimple, NestWealth, WealthBar, Steadyhand, Mawer, or Leith-Wheeler? If so, park this year’s RRSP contribution in a cash account until you’ve done some more research, give yourself a deadline to decide, and get researching.
Sandi Martin is an ex-banker and fee-only/advice-only financial planner at Spring Personal Finance who specializes in working with regular folks who suspect their money might be a bit of a mess. She lives in beautiful Muskoka with her husband and three children, and works online and by phone with clients across Canada.