Consolidation to single advisor has its benefits

It’s getting complicated these days to keep track of the various types of accounts and staying on top of limits for Tax Free Savings Accounts, Registered Retirement Savings Plans (RRSP) and other investments.

There are harsh penalties exist for those people who exceed maximum thresholds.  If you have more than one TFSA as an example, it is important that you tell the advisor at each institution you deal with what you have contributed.

Why do some people have their investments at multiple financial companies?  Was it the closest financial institution to make that last minute RRSP contribution?  Was it an inheritance that just seemed easier to keep at the same place?  Maybe it was a short-term advertised special on a TFSA that brought them into another institution.  It could be that you bought a proprietary product that could not be transferred after you purchased it.  There are many disadvantages for people not developing one good relationship with a financial advisor.

The following are a few benefits of consolidating your investments with one advisor:

Asset Mix

The most important component of investment performance is asset mix.  Consolidation can help you manage your asset mix and ensure that you have not duplicated your holdings and are therefore, not overexposed in one sector.   Unless your financial advisors have been given a copy of all of your investment portfolios, it will be difficult for them to get a clear picture of your total holdings.  Even if you were able to periodically provide a summary of each account to each advisor, as transactions occur you would still need to update every advisor with those changes.

Technology

Most firms provide access to view your investments online.  If you have accounts at different institutions, then you will need to get online access from each. It is not as easy to get a snapshot of your total situation when you have multiple accounts spread across multiple institutions.

Tax Receipts

If you hold non-registered investment accounts at several institutions, you will receive multiple tax receipts.  By consolidating your accounts, you will receive a limited number of reporting slips for income tax each year.  Reducing the number of tax receipts may also reduce the amount of time your accountant will spend completing your tax return.

Managing Cash Flow

Projected income reports from different institutions will be presented in various formats and at different points in time.  For you to obtain a complete picture of your financial situation, you will have to manually calculate the total income from your investments.  In situations where you have instructed your financial institution to pay income directly from an investment account to your banking account, it becomes more complicated to manage when there are multiple investment accounts.

Estate Planning

One of the steps in an estate plan is to deposit all physical share certificates and to reduce the number of investment accounts and bank accounts.  Having your investments in one location will certainly simplify estate planning and the administration of your estate.  It also assists the people helping you as you age.

Monitoring Performance

Some investors may be comparing the performance of one firm or advisor to another.  Investors should be careful when doing this to ensure they are really comparing apples to apples.  One investment account may have GICs while another may have 100 per cent equities, in which case we would expect returns to fluctuate during different market cycles.  It is easier to understand how all of your investments are performing when you receive one consolidated report from one advisor.

Conversion of Accounts

If you have multiple RRSP accounts and are turning 71 years old you may want to consider consolidating now and discussing your income needs.  It is easier to map out RRIF income payments when you have only one account.

Account Types

Fee-based accounts are usually suitable for a household that has total investment assets of $100,000 or more at one institution.  Consolidating allows these types of accounts to be an additional option.  As your account value grows, the fees as a percentage may decline in a fee based or managed account.

Service

In a perfect world all clients at all financial institutions are treated equal.  The reality is that the largest clients get better service.  By having $50,000 at six different institutions you are probably getting minimal service at each institution.  If you consolidated these accounts at one institution we would suspect that you would get significantly better service.

Other Benefits

When you have all registered and non-registered investments at one location it is easier for financial planning purposes.  Consolidation enables you to fund RRSP contributions through in-kind contributions.  Sometimes it is recommended to change the structure of your investments between accounts to improve the overall cash flow and tax efficiency standpoint – this can only be done if your accounts are at one financial firm.