Should you keep all your accounts, loans and investments at one financial institution, or spread them around? When I worked for a bank, when I had a new customer referral – for a mortgage, say – the goal was to transfer in all of their financial accounts. The reasoning behind this was that it would be more difficult to leave the bank once everything was set in place, and it’s true.
Whenever I have a complaint about my service and I vow to move all my accounts elsewhere, I think of the pain it will be to research a new bank, open and transfer all my accounts, perhaps they will hold all my deposits until they get to know me, I’ll have to learn a whole new system, aiy, aiy aiy! I guess I’ll stay put.
So, we know the bank is trying to keep you as a customer indefinitely, but what are the advantages to you to have all your finances in one place?
- When you go on-line, all your accounts are there, on one page, giving you a quick overview of all your balances.
- Links to investments and loans show holdings and recent activity and you can download them to accounting software like QuickBooks or Microsoft Money easily.
- Transferring funds between accounts is quick and simple.
- Past banking statements can be accessed on-line for the past two years or more.
- By consolidating similar accounts, you can often save money on fees. For example, a direct trading RRSP account charges an annual fee of $100 for balances under $25,000 and trading fees are reduced for balances over $100,000. So, if you’re paying fees on spread out small accounts, this could work for you.
- You may get to know a financial advisor at your branch who knows you well enough to recommend new products that will fit your financial plan.
- It can be a good bargaining tool to get a better interest rate – e.g. higher for GICs and lower for loans and mortgages – or other perks.
I personally keep most of my accounts with one financial institution with a couple of exceptions where I get a better deal elsewhere. But, I’m always open to offers and negotiation.
Do you have accounts at multiple banks, or are you loyal to just one?
I am hooked on dividend growth investing. For those of you who are not familiar with this strategy, dividend growth investing is pretty simple; when they are value priced, purchase shares in companies that have a long history of paying increasing dividends.
You’ll need to do three things to be really successful at this strategy.
3 Tips To Get The Most Out Of Dividend Growth Investing
1. Purchase shares at really attractive valuations – meaning you buy stocks when they’re on sale, like after a bear market (March 2009 being a prime example). There are a few ways to evaluate when a stock is a “good buy”.
You can use a low P/E Ratio, the Graham Approach, a Value Ratio, or simply look at High Dividend Yield, to name a few. Check out Stingy Investor for the most up-to-date listing of these methods.
2. Have the discipline to wait for share valuations to become attractive before you purchase them – this means that you could potentially hold your cash for years waiting for the right opportunity.
3. Have the patience to allow your dividend income to grow over time – you are not going to start off making $50,000/year in dividend income, but over time with a dividend growth investing strategy your growing dividends will compound and you could be earning that kind of investment income in retirement.
Tom Connolly, of the Connolly Report is the guru on dividend growth investing. The matter-of-fact way of describing his methods are priceless, and the entire website is just a gem to read. Here’s a quote from Tom on the dividend growth strategy:
When they are value priced, I buy common shares of companies with a good record of dividend growth and hold them for the rising income. In 2008 our dividend income rose in spite of the turmoil by 9.9%. Did your income rise by 10% last year. Our income will be up again in 2010 too.
Our retirement plan is working. It’s not the value of the capital that’s so important, it’s the income it generates…tax advantaged income…secure income. Dividend reductions from good dividend growers are rare events.
Also, check out Lowell Miller’s The Single Best Investment, and Stephen Jarislowsky’s The Investment Zoo. Both of these books highlight dividend growth stocks as a great way to build your investment portfolio and give you growing dividend income in retirement.
The dividend investor website is terrific for researching a company’s dividend paying history, and it looks like they have recently updated their data history. They were only showing dividend growth investing history as far back as 2000, but now it looks like it goes back to at least 1990.
The stock market can be wildly unpredictable, but dividend growth investing can be remarkably stable. Fortis (FTS) has increased its dividend for 37 consecutive years. If you bought FTS in 2005, you would now be earning 18% yield on cost from those shares.
Is it any wonder why I want to replace my employment income with dividend income in retirement?
I always check my investment statements for accuracy on a monthly basis and compare them to my transaction slips. I don’t really expect any fraudulent activity on my account but mistakes can be made, even by a large discount brokerage such as the one I use.
As an example, when I first opened my Tax Free Savings Account with them I was assured that the annual $50 fee would be waived if (1) I kept a combined total balance of over $100,000 in all my accounts or, (2) I signed up for on-line investment statements instead of mailed paper investment statements.
Review Your Investment Statements
Since I qualified on both counts I thought nothing of it again. Until that is I reviewed my statement a year later and saw a fee of $52.50 (including GST) hidden among my transaction fees.
A representative informed me that I had not integrated my three accounts (direct trading, RRSP and TFSA) like this was my own fault.
But one advantage of the integrated total was reduced trading fees ($9.99 vs $29) which is what I was paying so I knew the three account totals had been combined. Another time an expected dividend was not recorded in my account and I knew the company had not suspended their dividends.
Related: Pitfalls Of Chasing The Highest Dividend Yield
Even minor errors such as these should be reported. You don’t want to ignore your investment statements or sit on an error and then have to try to sue the firm when things don’t work out to your satisfaction, such as the case recently reported in the news.
Reviewing your investment statements is an important part of being a good, informed investor. You can’t know you’re on track or make any necessary adjustments to your portfolio if you don’t look at what’s been going on.
And you can’t build your investments expecting everything will turn out in your favour by accident or luck, and then cry about how bad the market is (or your advisor is) when you’ve lost money. Be responsible for your own wealth.