'If it appears to be free, there has to be a catch'

'If it appears to be free, there has to be a catch'

Free appears to be the magic word in the wealth industry right now, with new apps and funds promising no extra cost to the investor.

Fidelity, Wealthsimple and JP Morgan have all stepped forward with eye-catching products that make even the most reasonably priced advisor look expensive.

The fee compression has called into question the value of pure stock-pickers, with investors keen to know what else they get after funnelling a slice of their returns to a money manager.

No one works for free, according to Wolfgang Klein, senior vice president and investment advisor at Canaccord Genuity Wealth Management, who highlighted three of the most reliable funds as proof that money managed well comes at a price.

He said: “I’ve just finished doing some work looking at the performance of OMERS, Teachers and Canada Pension Plan and those are three amazingly managed pools of money.

“They have very successful track records and are very well managed, and their in-house costs are ranging from 60 to 90 basis points. So money cannot be managed for free, period. No one is going to work for free. If it appears to be free, there has to be a catch, plain and simple.”

Klein carries this philosophy into his own practice and is proud of the top-end fee he charges because he believes his service, which goes beyond good returns, justifies it. It’s this added value that the Bay Street advisor thinks is key to succeeding in an increasingly low-cost environment.

He said: “I get the odd customer saying, gee, there’s a broker down the street who’s cheaper than you. That I get. [But] I will say on the record I am a premium-priced advisor. My average fee is 1.5% and I’m very proud of it.

“You know why? Because my returns are as good if not better than CPP, Teachers and OMERS net of fees, my clients have a portfolio manager they can speak with directly and I’m not managing one account for clients, I’m managing 12 accounts for clients.

“Little accounts dovetail into big accounts and I layer in a financial plan and an ongoing dialogue in communication and we layer on a, hey, need to pick up the phone at the weekend and you need to call me? You can.

“Plus, I have a team around me to support my clients. So when there is an issue from getting divorced, a death, a birth, we are there to help clients because we know what we are doing.”

He added: “I deliver results and my fees are still half that of mutual funds and half that of hedge funds.”

 

Related stories: 
PM: Fidelity's zero fee funds a tipping point
Horizons: No need to charge management fee

 


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