A long life punctuated by various jobs, good times, difficulties, moves and mistakes can make an investment portfolio look like a cluttered basement. The objective of professional life aiming to accumulate as many assets as possible to build a nest for retirement ends at the same time as the income from employment, when the day of retirement finally arrives.
However, according to investment experts, the most important task to perform at this moment probably consists in cleaning up this batch of stocks, bonds, mutual funds and opportunities that should not have been miss – and make sure you understand them so that these investments last at least as long as you do.
“So they can come up with a TFSA , an retirement savings plan , they can have a LIRA, which is a locked-in retirement account, they can have a defined benefit pension, a defined contribution pension plan, in addition to non-registered accounts. “
“And these, technically, could be scattered in several vehicles with different financial institutions across Canada. ” Returns are vitally important during asset accumulation, but tax planning and risk management take priority when retirement becomes a reality, said Langford .
“People who have items in their action plan that do not match them, who have a hodgepodge, who have bought things over the years and can no longer remember why, must do something about it Said Adrian Mastracci, Vancouver fiduciary portfolio manager for Lycos Asset Management.
“Very often people come to us and have 30, 35 mutual funds. I don’t know how someone can handle 30, 35 mutual funds. Or even 15. ” Cluttered portfolios are often marked by the absence of written plans, non-existent savings projections, the glut of scattered accounts and the too small – or too high – amount of different categories of investments.
They may contain mutual funds whose costs and exit fees are unclear. Or different funds that contain the same types of securities.
Choosing the right advisor
MM. Langford and Mastracci recommend finding a single trusted advisor to review the entire portfolio and give advice on how to clean up.
They recommend choosing someone who is paid with fees, rather than commissions, for more unbiased recommendations. The result should be a calendar of actions aimed at providing maximum income and tax efficiency, with the least possible risk, for the expected remaining life of the customer.
“The way income is drawn from these sources will dictate the amount of taxes you have to pay for the rest of your life. If not done right, you will have to pay more than you need to, ”said Langford, adding that poor tax planning can cost hundreds of thousands of dollars.
The advisor should be chosen for what he can do for the retiree, said Mastracci. Different clients require different services, depending on the size and complexity of their investment portfolio. A good retirement planner should also be able to help the client find the investments they have lost track of, by tracing past employers and looking through files, he said.
He presented the example of a 65-year-old client whose goal is income of $ 100,000 a year for the rest of his life. This horizon could be 20 or 30 years or more, and that’s where the math gets complicated enough to test even the smartest lay investors.