The top 10 reasons for consolidating accounts

CanWest News Service
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Why do some people have their investments at multiple financial companies?

Was it the closest financial institution to make that last minute RRSP contribution? Was it an inheritance that just seemed easier to keep at the same place?

Maybe it was a short-term advertised special that brought them into another institution.

It could be that you bought a proprietary product that could not be transferred after you purchased it.

Why do some people have their investments at multiple financial companies?

Was it the closest financial institution to make that last minute RRSP contribution? Was it an inheritance that just seemed easier to keep at the same place?

Maybe it was a short-term advertised special that brought them into another institution.

It could be that you bought a proprietary product that could not be transferred after you purchased it.

There are many disadvantages to not developing one good relationship with a financial adviser. The following are a few benefits of consolidating your investments with one adviser:

Asset mix: The most important component of investment performance is asset mix. Consolidation can help manage asset mix and ensure you have not duplicated your holdings and are not overexposed in one sector. Unless your financial advisers have been given a copy of all of your investment portfolios, it will be difficult for them to get a clear picture of total holdings. Even if you were able to periodically provide a summary of each account to each adviser, as transactions occur you would still need to update everyone with those changes.

Technology: Most firms provide access to view your investments online. If you have accounts at different institutions, then you will need to get online access for each. It is unlikely that you will be able to transfer funds between these institutions online.

Tax receipts: If you hold non-registered investment accounts at several institutions, you will receive multiple tax receipts. By consolidating accounts, you will receive a limited number of reporting slips for income tax each year. Reducing the number of tax receipts may also reduce the amount of time your accountant will spend completing your tax return.

Managing cash flow: Projected income reports from different institutions will be presented in various formats and at different points in time. To obtain a complete picture of your financial situation, you will have to manually calculate the total income from your investments. In situations where you have instructed your financial institution to pay income directly from an investment account to your banking account, it becomes more complicated to manage when there are multiple investment accounts.

Estate planning: One of the steps in an estate plan is to deposit all physical share certificates and to reduce the number of investment accounts and bank accounts. Having investments in one location will certainly simplify estate planning and the administration of your estate.

Monitoring performance: Some investors may be comparing the performance of one firm or adviser to another. Investors should be careful when doing this to ensure they are really comparing apples to apples. One investment account may have GICs while another may have 100 per cent equities, in which case we would expect returns to fluctuate during different market cycles. It is easier to understand how all of your investments are performing when you receive one consolidated report from one adviser.

Conversion of Accounts: If you have multiple RRSP accounts and are turning 71, you may want to consider consolidating now and discussing income needs. It is easier to map out RRIF income payments when you have only one account.

Account types: Fee-based accounts are usually suitable for a household that has total investment assets of $100,000 or more at one institution. Consolidating allows these types of accounts to be an additional option. As your account value grows, fees as a percentage may decline in a fee-based or managed account.

Service: In a perfect world, all clients at all financial institutions are treated equal. The reality is that the largest clients get better service. By having $50,000 at six different institutions, you are probably getting minimal service at each institution. If you consolidated these accounts at one institution, we would suspect that you would get significantly better service.

Other benefits: When individuals have all of their registered and non-registered investments at one location, it is easier for financial planning purposes. Consolidation enables you to fund RRSP contributions through in-kind contributions. Sometimes it is recommended to swap investments between accounts to improve the overall structure from a cash flow and tax efficiency standpoint - this can only be done if your accounts are at one financial firm.

Note that consolidation takes time if investments are locked in at the different companies. A plan should be created to consolidate investments on the respective maturity dates.

Keith Greenard CIM FCSI and Kevin Greenard CA FMA CFP are wealth advisers at The Greenard Group at ScotiaMcLeod in Victoria. Victoria Times Colonist

Organizations: Greenard Group, ScotiaMcLeod

Geographic location: Victoria

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  • Brett
    July 02, 2010 - 13:14

    Just remember that bank and investment accounts are insured to a certain amount. I think it's 250k.... Not sure if it's different amounts for different account types.

    Of course it's really only an issue for those who have that much or more stashed away.

  • Brett
    July 01, 2010 - 19:53

    Just remember that bank and investment accounts are insured to a certain amount. I think it's 250k.... Not sure if it's different amounts for different account types.

    Of course it's really only an issue for those who have that much or more stashed away.