Ken Stern, Aligned Capital Partners
Now that the cost of do-it-yourself investing has been pounded almost into the ground, we need to do something about people who have advisers.
A DIY investor can build a simple but effective portfolio of exchange-traded funds with commission costs of $10 down to nothing per transaction, and only a tiny cost of ownership. In a fee-based advisory account, the cost of advice and trades comes in roughly between 1 and 2 per cent. On top of that, you have to add the fees associated with owning particular investments.
A basic rule of investing is that lower costs feed higher returns. If you’re the sort of investor who is best served by having an adviser, the most practical way to follow this rule is to squeeze the costs of the products you own as low as possible. Advisory fees vary, but insisting on the cheapest makes no sense. Value in terms of services provided is important, too.