By Tom Bradley
Over the last year or so, there’s been a growing trend towards combining indexing with paid advice. It’s coming up more in the media, and is a common solution in the financial advice columns – ‘hire an advisor to manage an ETF portfolio’. The well-followed Couch Potato, Dan Bortolotti, has formed an advice service with PWL Capital to help clients build and maintain index portfolios. The low-fee, indexing icon, Vanguard, has focused its Canadian marketing efforts on advisors. And Scott wrote last month about the new Blackrock mutual funds, which marry indexing with advice.
It struck me this morning (finally) that as far as fees are concerned, the worm has turned. Now, rather than being at a fee disadvantage to ETFs, Steadyhand and other direct providers like Mawer, Leith Wheeler, Pembroke and RBC/PHN are at a fee advantage. The combination of ETFs and advice generally costs more than a low cost mutual fund, which also comes with advice.
The ETF/Steadyhand fee comparisons have never really bothered us, because they’re always done on an apples-to-oranges basis (We’ve done our own - remember Julie and Jake?). Our fee schedule, which is unique in how it rewards commitment and loyalty, gets us in the low cost game, but clients aren’t going to come to Steadyhand because we’re two tenths of a percent cheaper than another firm. We would hope that people, service, advice, investment philosophy and long-term performance are more important factors.
Nonetheless, it’s kind of cool to be able to ask firms using ETFs to justify their fees. I can turn the tables, maybe get in their face a little. “Hey you … yah, you … if I’m guaranteed to lag the market indexes by 1.25-1.5%, what do I get for that? … don’t get slippery on me … give me the straight goods.” It’s going to be really cool.