Weekend Reading: When To Hire A Financial Advisor Edition
A few months ago I made an offhand remark in a weekend reading update that caught the attention of several readers:
“You might be surprised to hear that if something happened to me, my wife has been instructed to hand everything over to PWL Capital. That’s how much I believe in the good work that group is doing.”
Apparently that surprised some of you. I understand that it’s a surprising statement coming from an advice-only planner who is a big proponent of self-directed investing.
Here’s one recent email from a long-time reader:
Hi Robb,
I keep going back to this comment which you made a while ago. I’m not sure if anyone else has noticed or reacted. So as a “fee-only advisor,” and a “one-fund” investor I am curious as to how you have arrived at this decision. What is it about PWL that made you arrive at this decision to let go and let someone else carry the load?
To start, I don’t have any affiliation at all with PWL Capital – I talk them up because I really respect the work they do for their clients, for DIY investors, and for the financial planning community in Canada (truly leaders in their field).
The fact is my wife is a brilliant woman who understands our financial situation and investing approach, but she has little-to-no interest in managing our long-term financial plan.
And while I’ve taken great steps to simplify our financial life so that, in theory, someone could take the reins after I’m gone, we still have a complex situation with a corporation and multiple account types.
It’s not just about continuing to hold VEQT or XEQT across all accounts. It’s the tax planning that complicates things, and where a firm like PWL can help ensure the correct compensation (salary/dividends from the corporation, withdrawals from personal accounts, timing of government benefits) is used throughout her lifetime to meet financial goals for herself and our kids.
For some context, imagine I tragically get hit by a bus in 12 years. At that time, we have a net worth of $5.66M, and $2.2M of that is in our corporation.
Does this look like a simple situation for someone to begin their DIY planning and investing journey?
Meanwhile, PWL is out there leading the charge on evidence-based financial planning (plans before products) and investing. They use one-fund solutions from Dimensional Fund Advisors, that have a tilt towards small cap and value stocks that have (theoretical) higher expected returns than a market-cap weighted index fund.
“PWL’s service includes goals / values identification, asset allocation, portfolio management, retirement planning, tax planning, and estate planning. We view all planning and advice through both utilitarian and emotional well-being lenses.”
They charge reasonable fees (well under 1%, since it’s on a sliding scale based on investable assets) and that fee would be easily made up in peace of mind for my wife to not have to think about this, and for the precision-like tax planning to help my wife and kids meet their spending needs and live their best lives in the most efficient and effective way.
I realize that paying fees of $25,000 per year might sound outrageous to some of you – but to put that into context it’s just 0.57% per year to work with a firm and advisor team that I completely trust to look after my family’s best interests.
A reasonable alternative might be to transfer everything to Wealthsimple’s robo-advisor (managed) solution and use their financial planning and advisory service. The cost would be similar (0.40% management fee + the cost of the ETFs used in their model portfolios). Let’s call that plan ‘B’ in case PWL gets bought out by an evil bank or something.
But what I like about PWL is their commitment to finding and funding a good life for their clients. They put planning, goal setting, and well-being first, and then they’re at the cutting edge of best practices to help clients meet those goals in the most tax efficient way.
That sounds like a pretty good recipe for successful outcomes.
This Week’s Recap:
Last week I shared an update to our 2024 financial goals and a look ahead to our goals for 2025.
I was happy to contribute to this article on why some retirees are reluctant to spend money when they can afford to (Toronto Star subs).
Promo of the Week:
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Weekend Reading:
Here are five costly mistakes to avoid in your 40s for a better retirement.
The psychology of retirement income – from saving to spending.
From CTV news, here’s how to switch from saving for your golden years to spending.
Aaron Hector shares what the REAL OAS deferral enhancement means.
How often should you update your financial plan? Jason Heath explains why a financial plan is never final.
Ben Felix looks at Trump’s win and expected stock returns (the Presidential puzzle):
A Wealth of Common Sense blogger Ben Carlson looks at the 30% up years in the stock market.
The biggest risk to your retirement might not be what you think (spoiler, it’s inflation).
The Loonie Doctor takes an in-depth look at a common problem – transferring a managed taxable account to a self-directed brokerage and capital gains tax versus fee savings.
Finally, a recurring theme, why retirees struggle with the transition from saving to spending.
Have a great weekend, everyone!
Sharing your rationale and illustrating with numbers is really helpful. Incidentally, I have made exactly the same comment a few times too. I can also see that as I get older, I will want to make the transition in advance of cognitive decline. Hopefully a while away, but building trust and comfort before I make a mistake will be important. Plus, a third party to help my family with the wealth transition may be another factor, too. I recently wrote about that as well and will add a link to this post to illustrate it applies even to advisors as well. Thanks for sharing.
-LD
Thanks Mark! Totally agree that it’s not just about an “in case I die” scenario but in preparation for eventual cognitive decline as well.
Keep up the great work on your site and the Money Scope podcast – incredibly valuable stuff!
Robb; Definitely food for thought. My wife also has no interest in managing the investments. Curious where you found the PWL sliding scale fees? I didn’t see them on their website. Also wondering if you compared to others that offer similar services.
I just put 100k in Wealthsimple. Gives me a chance to trial their service.
I appreciate reading your articles.
Hi Wayne, I’ve seen their fees referenced a few times. Mark McGrath recently posted them on Twitter: https://x.com/MarkMcGrathCFP/status/1795848739455979678
There are certainly other advisory teams following similar planning-centric and evidence-based investing approaches, but I’m most familiar with PWL and that trust goes a long way.
I’d start with members of the Financial Planning Association of Canada and narrow down my search from there.
How were you able to get to $700k in TFSAs?? I assume you invested in index funds/ETFs.
I’m at $155k and I’m maxed out (probably the same age as you more or less – no withdrawals). I started with RBC index, and there were some years where I didn’t max, plus there were a few months where I invested in a crypto ETF that I pulled out from eventually with a loss of $9k, but otherwise I’m in broad index ETFs. No where close to ~$350k/person.
Not sure if you caught this part:
“For some context, imagine I tragically get hit by a bus in 12 years. At that time, we have a net worth of $5.66M, and $2.2M of that is in our corporation.”
$690k is the expected value of the two TFSAs at the end of 2036.
Our current TFSA balances are about $25k each 🙂
Great post – always appreciate your content! Probably also worth mentioning that a portion of the AUM fee would be tax deductible for the non-registered investments.
Funny, I was going to mention that but thought it might be getting too far into the weeds. Besides, that would be the case with any investment advisor, not just PWL.
Thanks for your comment!
Hi Robb,
I really enjoyed the article and the thought process behind your decision to use PWL Do you have any thoughts regarding what PWL offers vs Objective Financial Partners for your future situation.
Thanks,
Don
Hi Don, thanks for the kind words.
Objective Financial Partners is an advice-only planning firm (one of the best in the country, mind you, where I send prospective clients who have more complex situations).
They do not manage your money, so they’d work with you on the financial planning aspect and then help you farm out the investment management piece.
Obviously I’m a big believer in pairing low cost DIY investing with on-demand financial planning advice from an advice-only planner – it’s literally what I do for a living.
But with that arrangement you’re still in the driver’s seat executing the plan, and some people (like my wife) would prefer to delegate that to a full service advisory team.
PWL is a full service firm (investments, financial planning, tax planning, estate planning) and so you have a one-stop shop for everything for more seamless integration.
As I’m writing this I think it would make sense for me to do a follow up “flow chart” of the types of clients and situations that would be best suited for different types of advice: DIY, advice-only (simple), advice-only (complex), and full service.
Hi Robb, I will definitely look forward to seeing that flow chart when you write about it.
If your wife were to switch the accounts over to PWL, would you leave her instructions asking to have a particular person at PWL look after the portfolio or would you be fine with whomever they assigned? In your article does the total 0.57% fee include tax and estate planning services or are there extra fees and costs associated with that?
Yes Robb; I’d certainly be interested in seeing such an illustrated flow chart … showing the different options for us… as our individual scenarios transition from bus crashes (in Ottawa) …through market crashes …to eventual inevitable brain crashes.
It could also be helpful for the inheriting generation …to visualize their options after their Net Worth jumps (?substantially?) following their inheritance.
Great article. I have the same approach. I have an “If I Die” thumb drive on the shelf above my desk. It has all the key information and a suggested approach. I update it monthly. The first thing in that document is to contact a wealth advisor that I have met a couple of times and trust. If I wasn’t such a control freak and didn’t mind the 1% fee he would charge I would have passed the portfolio to him already. In fact, I suspect I might have been better off as I would have avoided a stupid mistake. Nevertheless, I’ve got things on the right path now, but I need to know my wife will have someone to trust if I pre-decease her. And, as others have commented, I may very well hand over the reigns if I’m capable of recognizing that I’m starting down the road of cognitive decline.
Hi James, thanks. I like your thought process and wish more DIY investors had this type of awareness and humility.
Mistakes get amplified as you get older and when there’s more money at stake.
I wonder how many people like your wife feel the same way?
Mine sure does – she appreciates the approach but would prefer to live her life vs manage investments, tax, corp payments, insurance.
It’s such a needed service to provide, glad you are able to recommend someone.
Though our first stop is you, so avoid buses at all costs, Robb!
I think it’s pretty common to have one Chief Financial Officer of the household and then a disinterested spouse (not necessarily the male CFO, either. I work with plenty of women successfully driving their household finances and investing decisions, while the male spouse wants nothing to do with it).
I do wish PWL offered other compensation structures. Like “hey I need a financial planner on an ongoing basis, but I am already 100% set up for my investments/what to invest in, and do not want exit my low cost ETF strategy.”
It would be cool if they had a fee-for-service arm of the business for all the DIY investors that look up to Ben, Justin, and Dan.
We could always restart the DIY Investor Service if you were interested in running it, Robb 😉
Hey, don’t tempt me!
Hi Rob,
Great post. Great fan of PWL and in particular, Felix. Quick question: in the calculation of the PWL fees on your investing journey example, does it include the ongoing fees for the Dimensional Funds? Curious….
Hi JoeMar, my understanding is they use the DFA F-class funds and the cost is something like 0.31%.
So, in my example that would take the all-in fees up to 0.88%. Still pretty reasonable for access to the best evidence-based financial planning and investing in Canada.
Totally agree, thanks.