What Am I Paying You For?

When I meet with potential clients, we follow this process.

Near the end of our second meeting, after we’ve reviewed everything that’s important, I often get this question:

“We’ve hardly discussed how we’ll invest, Vince. What are we going to do?”

I say the same thing every time:

“Not counting the short-term money that we know you’ll need for X, Y, and Z, on dates A, B, and C – and knowing we have to invest in line with your tolerance for volatility – you’re going to own the entire stock market. If you have a low tolerance for volatility, we’ll add in some bonds. But I hope not.”

“OK, but what about the stocks, the funds, the regions, the strategy?”

“You’re going to own everything.”

“Everything?”

“Everything.”

And most people are fine with that. Because ultimately, investors care about earning a respectable return that gets them to where they want to be (i.e., a retirement with a nest egg that will provide them with income until they’re dead, at least). They don’t care how they get it. It can be 30 stocks, one ETF, or five mutual funds—they just want the money to be there when it matters.

Is there nuance? Yes. But it depends on your own goals and comfort with volatility. If you’re wondering what kind of nuance, think of how much of a ‘war chest’ you should set aside for your known retirement income, how close to retirement you should set it aside, and how much you should set aside. Those are personal considerations.

I tell this story because every so often, after I’ve explained the above, a potential client will ask:

“Then what am I paying you for?”

And that’s a fair question.

For decades, the financial industry marketed itself as though investments were everything and the only thing. Stock-pickers, market-timers, and alpha-seekers were what we told you that you needed. I’m lucky I entered the profession just as financial planning became more important than just investment management.

Now, don’t get me wrong—investment management is important. But one of the most important parts of investment management is inaction. And inaction is bloody hard, especially when everyone and everything is always telling you to do something.

“Buy equities and never sell them” is a beautiful phrase, but my god it’s hard to do.

So if your investment portfolio just owns everything, what do you pay me for?

Here is a non-exhaustive list of everything we do. I’m sure colleagues and competitors would add a lot more:

• Financial planning – What’s important? What are your goals? And how the heck do we get you there in the simplest manner possible?
• Asset allocation – Does your investment portfolio match your tolerance for volatility?
• Behavioural coaching – Let’s keep emotions out of the investment and financial planning process (I think this is the most valuable part of my job and by a wide margin).
• Spending strategies – Making sure the money you need is available when you need it.
• Tax planning – What can we do now to avoid a big tax bill in the future?
• Estate planning considerations – How much tax do you pay when you die, and what can we do to minimize it?
• Risk management – A fancy way of saying, “do you have appropriate insurance?”
• Account optimization – RRSP? TFSA? FHSA? RESP? Which account should you open, and why?
• Cash flow planning – Are you saving enough now so you can live off your savings in the future?
• Consistency – Providing clarity when everyone else has lost their mind.
• Cost-benefit analysis of financial trade-offs – Should you do this or that? Let’s find out.

You don’t hire me to pick the perfect stock. You hire me to make sure everything works together—your investments, your goals, your emotions, your timeline, your plan.

You hire me to keep it all working.