The cost of guided portfolios

Depends on what you hold in it

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From the September/October 2014 issue of the magazine.

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(Blend Images/Hill Street Studios)

(Blend Images/Hill Street Studios)

Q: My financial adviser at Edward Jones recently suggested I move my RRSP to a Guided Portfolio that uses stocks and ETFs instead of mutual funds. The pitch is that I will save a couple of grand on fees annually. Is this true? —Paul Mayhew, Oakville, Ont.

A: Most likely yes. But, it depends on what your current portfolio is costing you, how much you have to invest and your willingness to stick to stocks. Let’s say you have $50,000 in mutual funds with an average management expense ratio (MER) of 2.3%. If you move that money over to the Edward Jones Guided Portfolio and choose to put it into stocks your fee would be 1.8%, which would indeed save you money. If you have $500,000 the fee would be even lower, at 1.4%. Now, if you hold mutual funds—or even ETFs—instead of stocks in this product, you’ll pay the MERs associated with those products, reducing the savings with the all-stock portfolio. But that isn’t the purpose of the Guided Portfolio, says Janesse McPhillips of Edward Jones. Rather, it’s for investors with “a desire to have some involvement in their investment decisions,” and who are interested in the written financial strategy and rebalancing that comes with it. In my opinion that stuff should be standard issue, but sadly it isn’t. Still, I think the big idea of the Guided Portfolio is that Edward Jones is making it possible for people to open a fee-based account with less than a half million dollars.

Bruce Sellery is a frequent guest on financial television shows and author of Moolala. Do you have your own personal finance question? Write to us at ask@moneysense.ca

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