Med-Wealth

Stop Accepting Mediocrity

Stop Accepting Mediocrity

Cookie-Cutter Portfolio Solutions

  • Over the last 25 years or so, the financial industry in Canada has commoditized their investment solutions into ‘all-in-one’ portfolios. Most people’s risk tolerance lands them in a typical ‘balanced fund’ allocated 60% to stocks and 40% to bonds;
  • Future return expectations – the balanced portfolio solution does not consider that bonds no longer offer attributes and benefits that they historically provided.
  • Near-Zero interest rates and the potential for rising interest rates and inflation in the future make bonds a poor investment diversifier, relative to historical experience.
  • Lower expected returns means – the inability for investors to achieve their retirement objectives;
  • When solutions are all constructed using the same strategies, the only differentiation becomes ‘price’ – i.e. the management fee.
  • The only advantage in such an environment that can be sought is from ‘lower fees’. Thus the increased competitive alternatives that focus on fee-reduction.
    • This is a fallacy. Lower fees don’t necessarily result in higher returns. It depends on portfolio construction and investor’s behavioral responses to market events and risks;
Stop Accepting Mediocrity
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