How do I find a broker?

[accountingsucks]

A little about me.

I am 30.
Car paid off
Home bought for 185K now worth 240K with 40K remaining on mortgage (310 a month)
Emergency funds (high interest account) : 20K
RRSP : 30K

I have been focused on paying down my mortgage the last 5 years to the detriment of my retirement plans (most of the 30K is company defined contribution contributions). I simply am debt averse and feel much better now that it is down from it's original amount.

After all my monthly expenses I have $2300 left over and am planning on contributing $1300 of that into my RRSP's each month. The other $1000 will be "invested" in a high interest savings account for now at 3% which i will apply against my mortgage until it is paid off in a few years.

My question is how do I find someone I can trust with my money? Should I just work with my bank and invest in some of the mutual funds they have - actually the bank I am with partners with most of the major mutual fund companies so I can invest in almost any mutual fund. Every year I would make a RRSP contribution and just do it through the bank and into a index fund that tracks the Canadian TSX and it has done well. I guess my other options are to work with a mutual fund directly speaking to one of their advisors. Thirdly I could work with an independant broker/investment guy who would essentially invest for me, however I imagine I would be too small of a fish for them to even bother with me.

Any help is appreciated.

 

[JohnP]

Hey welcome accountingsucks -

It looks like you are doing pretty well now based on LBYM, paying down debt, and building up some emergency cash.  I'd recommend that you keep much of that 'mode' going and not screw it up by actively seeking someone to care for your money.  You can do it yourself better than they can if you only follow a few guidelines that the RE forum frequently covers; diversified portfolio, asset allocation, low cost, etc.

It is tempting to go to your home bank and talk to them for advise;  this is not really a prudent approach since the people you meet there are not likely to be from the bank at all.  Our bank has turned over several front cubicles of most branches to employees of a high cost broker as an additional way to lighten your wallet.  High expense ratio funds and brokerage services are sold there, so watch out.

I like Vanguard but others here are partial to Fidelity, T Rowe Price, schwab, and many other low cost providers.  A percent or two 'here and there' in expense ratio and management fees add up to a big impact on your eventual portfolio.   

Best regards
JohnP

 

[Dawg52]

Do your pocket book a favor and do it yourself. Vanguard and Fidelity offers good low cost funds. Look at the Target Funds, they should do the trick for you. Good luck.

 

[ats5g]

My question is how do I find someone I can trust with my money? Should I just work with my bank and invest in some of the mutual funds they have - actually the bank I am with partners with most of the major mutual fund companies so I can invest in almost any mutual fund. Every year I would make a RRSP contribution and just do it through the bank and into a index fund that tracks the Canadian TSX and it has done well. I guess my other options are to work with a mutual fund directly speaking to one of their advisors. Thirdly I could work with an independant broker/investment guy who would essentially invest for me, however I imagine I would be too small of a fish for them to even bother with me.

Ask said person how they are compensated. If they are only compensated when you buy something through them, then you can never really know if this person is giving you good advice, or just having you buy the fund that will make him/her the most money.

People can call themselves whatever they want. In the states, places like Edward Jones and Raymond James claim that they are "independent financial advisors". Nothing could be further from the truth. The term "financial advisor" is not given to people by any regulatory organization [like SEC or NASD in the US, or IDA in Canada]. Anyone can call themselves a "financial advisor".

Going to a bank or a brokerage and asking "Hey, were should I invest my money?", is like going to a car salesman and asking "Hey, which car should I buy?" Obviously, these people only make money when you buy something, so it's not like they're going to say "Well I was going to recommend XYZ, but it's way too expensive, so I think you should just buy ABC index fund directly from the mutual fund company?" These people are in the business to make money for themselves and their company. Most of them have a certain $$ amount per month or per year that they must generate in commissions or they get fired. Of course, they're going to have wonderfully colorful sales material charts showing how much money they've made great some investment is. Don't believe it, it is a sales pitch pure and simple.

Unless you want to buy something that needs to be purchased through a broker, like an ETF, I'd buy directly from the fund company.

- Alec

 

[LOL!]

Even from a casual glance at any of the messages posted on this message board, one should be able to figure out how to find a place to invest at major mutual fund company like Vanguard or Fidelity or TRPrice or Dodge&Cox.  You would also know that folks here avoid their banks' investment desks like the plague.

Bottom line: there is no one you can trust with your money. Best place to look: in the mirror.

 

[accountingsucks]

Even from a casual glance at any of the messages posted on this message board, one should be able to figure out how to find a place to invest at major mutual fund company like Vanguard or Fidelity or TRPrice or Dodge&Cox. You would also know that folks here avoid their banks' investment desks like the plague.

Bottom line: there is no one you can trust with your money. Best place to look: in the mirror.

I am just wondering why people feel this way regarding investing through their bank? I am in Canada and invest through Scotiabank simply because that is where I do my banking. Their mutual funds are managed by Scotia McLeod which is their brokerage division. I guess truthfully I have no idea what kind of management fees I am paying on the index funds I have there. If I were to invest with a mutual fund company directly (here in Canada the big ones are Altamira, AIM, Fidelity) would I not be paying higher fees since they have to obviously pay for offices, staff, etc.... at least with a bank their mutual funds are an add-on service and theoritiacally they should be charging less for something simple like an index fund seeing as how their overhead costs are deferred by their regular banking services.

 

[LOL!]

I am not Canadian and do not completely understand the differences in laws that affect investments, financial things, and retirement in Canada and the US.  There are some things that have to be a constant though.  First, fees and expenses can reduce your returns, so one should strive to keep them as low as possible.  Second, advisors do not always have your best interest in mind when they advise you.  I think there must be some good advisors out there, but I have no personal experience with a good advisor, nor have I ever heard from any friends or family of a good personal experience with an advisor.

Now you asked in the title of this thread of how does one find a broker, but you asked in your original post about finding someone you could trust with your money.  To me, these are two different questions.

In my opinion, a good broker is someone who will follow your instructions to buy/sell investments and not charge you very much.  In the US, I have used TDWaterhouse for years and can recommend them.  Their Canadian website is www.tdwaterhouse.ca.   I am also opening a brokerage account at my bank in order to get free financial services.  For both of my brokerage accounts I am not getting advice from the broker.

On the second question, my previous answer remains the same: trust no one with your money, except yourself. Even if you feel you can not perform the tasks of investing by yourself and that you need someone to help you, I think that you will need to gain some knowledge so that you can understand what the person (bank person, mutual fund advisor, broker) is telling you. I feel one should learn enough to trust themselves. This may require a little work on your part, but it ain't rocket science nor is it brain surgery.

 

[ladelfina]

I'm having the same conundrum in Italy. Most people here invest and buy annuities and insurance policies through their banks, which haven't had the type of separation of services once imposed upon US banks (but now slowly breaking down).

I get the impression that the banks are FAR less transparent and take gross advantage of the fact that most people invest with them (as in your case) simply out of habit, convenience, or tradition.

I .. invest through Scotiabank simply because that is where I do my banking.  Their mutual funds are managed by Scotia McLeod which is their brokerage division.  I guess truthfully I have no idea what kind of management fees I am paying on the index funds I have there.

And you are an Accountant!!!!    This is EXACTLY the kind of thing that banks take advantage of!! Run, do not walk, to the nearest independent discount broker.

You mentioned Fidelity, so look into that. I noticed that E*Trade also has a Canadian branch at https://swww.canada.etrade.com/pages/home/main.shtml and has a no-fee RRSP. Schwab I know has an extra fee for non-US accounts, not sure about Vanguard or other US-based firms...

This site: http://www.bylo.org/ has a lot of Canadian-based content. Of course I can't vouch for it, but it looks like it would be worth looking through.

Good luck with your independent investing! 

 

[ats5g]

You can find out how much you're paying in management fees for the Scotia Mutual Funds. Looks like the cheapest funds are the index funds at 1.00% MER and up. IMO, you're getting raped.

Bylo's site is awesome. Bylo and some other old fogie's experienced Canadian investors run The Financial Webring site, including their forum, which has mostly Canadian investors. They'll probably know more about were to get the lowest fee investments/index funds.

- Alec