17 September, 2019


Bob and Jane came into my office last week to get a second opinion and lay down the basis for a financial plan. We had never met before but they came well prepared with their wills and powers of attorney, their last tax returns and notices of assessment, insurance policies, work benefit guides and pension statements. Then came a stack of investment statements. At first I thought they brought every monthly statement they received from one account over the last few years, but it turned out they had twenty-one separate accounts at ten different institutions. This did not include their five different chequing and savings accounts at three different banks. Talk about a paperwork nightmare! Bob handles all of the finances in the family and when I asked him why there were so many different accounts, he said it was so he could diversify his holdings. He was so “diversified” he couldn’t even come up with an exact amount that they had in savings.


Can you imagine the trouble Jane would have sorting out the estate if Bob passes away before her? When we met, Jane had no idea where all the accounts were and, since Bob did all the on-line banking, she was not aware of which accounts paid the bills or even what the passwords were to access the accounts. Jane could spend forever trying to locate all of the different accounts and she may never be sure she found them all. Not only would consolidating their accounts be beneficial from an estate planning point of view, it would also make it much more efficient and easier to manage from and investment point of view.


Holding various accounts at different institutions does not necessarily accomplish diversification. In actuality, diversifying by investment advisor can achieve the exact opposite and even have a negative impact on your overall investment returns. When we overlapped all of the accounts to see where they were invested, we found a substantial amount of Bob and Jane’s holdings were concentrated in the same geographic regions and invested in many of the same securities. This is common since one advisor does not know where the other advisor is putting Bob and Jane’s money.


This also has a negative impact on their investment asset allocation. The majority of your returns are determined by how much you have in each geographic region, market capitalization, investment style, stocks, bonds, and commodities. When you have a number of investment advisors, they cannot accurately maintain a target asset allocation that takes into account what the other advisors are doing. It also makes it near impossible to rebalance back to an original asset allocation as one advisor strips off the profits of securities and buys into other areas, while another advisor buys back into the same securities that were just sold. Rebalancing keeps your portfolio at its optimal mix and has proven to be effective in increasing investment returns over time.


Simplifying Bob and Jane’s estate can be remedied with the use of an estate directory that lists all the important financial data such as where all the accounts and insurance policies are located. Rebalancing their investments back to a pre-determined asset allocation and avoiding duplication is best achieved with one investment advisor.


Doug Riding BA, CFP®, FMA, FCSI®

Senior Investment Advisor with IPC Securities Corporation