Author Topic: I'm invested with a 2.89% MER and didn't know it!  (Read 2532 times)

Saskatchewstachian

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I'm invested with a 2.89% MER and didn't know it!
« on: August 28, 2016, 02:01:37 PM »
A little backstory on this one.

A friend of mine had a part time gig working for a financial company more or less as a financial planner. I.e. they would come to your house sit down run through a budget with you, savings, insurance and all the other stuff. I already had everything set up but thought it would be good to possibly have an "expert" come in and look at it. So we sat down and i pulled out my spreadsheet of my last 4 years of spending down to the penny and breakdown of where all the savings were.

Finally the sales pitch came and it was to move retirement accounts under the umbrella of their company and they will manage them for you. This was prior to me knowing about MMM so I said sure and transferred an old RRSP from an old employer into this new plan.

A month later I get a letter showing me where it's all invested and I see it's in an global equity ETF, "Cool that fits into my portfolio well" I thought.

Just recently I run into said person and happen to ask what the MER is for the investment, 2.89%!!!!! My jaw almost hit the floor. I just ran the numbers on the difference between 2.89% and 0.15% in a market returning 7% over 25 years and it looks like they'd be getting 53% of my returns, or 62% over 40 years!

Needless to say I need to get out of that investment very quickly. I was kind of surprised because this is a great guy however he MUST know that he is taking a massive amount of returns from his customers while not actually giving them good advice.

Very glad it was <10k in that account.

Rubic

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Re: I'm invested with a 2.89% MER and didn't know it!
« Reply #1 on: August 28, 2016, 02:50:40 PM »
I was kind of surprised because this is a great guy however he MUST know that he is taking a massive amount of returns from his customers while not actually giving them good advice.

"It is difficult to get a man to understand something, when
his salary depends on his not understanding it.
"

- Upton Sinclair

marty998

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Re: I'm invested with a 2.89% MER and didn't know it!
« Reply #2 on: August 28, 2016, 03:24:36 PM »
Whole industry depends on people who don't know / didn't realise that they are paying 2.89% or more.

The field is ripe for disruption by players who can go over and above Vanguard and provide good advice on investment allocations for 1/10th of the usual cost.

Saskatchewstachian

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Re: I'm invested with a 2.89% MER and didn't know it!
« Reply #3 on: August 28, 2016, 03:36:02 PM »


"It is difficult to get a man to understand something, when
his salary depends on his not understanding it.
"

- Upton Sinclair
[/quote]

Love the quote!

When I raised the issue with them I got the typical "but we can get better returns" and all that. In the Financial Workbook they do for you in the original assessment they actually show values as high as 12% annual returns to illustrate their points and retirement projects. Now if they were in fact doing 12% year over year I would invest in a heartbeat however seeing they invested it in a normal international equities fund there is ZERO reason for me to stay.

MustacheAndaHalf

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Re: I'm invested with a 2.89% MER and didn't know it!
« Reply #4 on: August 28, 2016, 04:51:59 PM »
A friend of mine ... working for a financial company ...
As a general comment, introductions like that don't end well.  I think you're opening yourself up too much to this happening again.  It's good you discovered the expense ratio, but it won't always be so clear.  When another friend wants to offer you a whole life product that also serves as an investment vehicle, I'd suggest telling friends that you don't mix your retirement with friendships - because in that case, neither will stand the test of time.

Saskatchewstachian

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Re: I'm invested with a 2.89% MER and didn't know it!
« Reply #5 on: August 28, 2016, 05:00:57 PM »
A friend of mine ... working for a financial company ...
As a general comment, introductions like that don't end well.  I think you're opening yourself up too much to this happening again.  It's good you discovered the expense ratio, but it won't always be so clear.  When another friend wants to offer you a whole life product that also serves as an investment vehicle, I'd suggest telling friends that you don't mix your retirement with friendships - because in that case, neither will stand the test of time.

Funny you say that! I have actually already had that happen as well but it was by a distant relative instead of a friend. Luckily even before MMM I had read enough to know NOT to get whole life as I could do much better saving on my own. Did get regular term life for a short term (~$20/month) for a lot of coverage.

But I definitely think I will take the rest of the advice from now on and not mix friendship with retirement planning.

My other dilemma is that the friend also signed up other friends (fellow engineers), and as much as I know i shouldn't get involved as it's not my place to tell them where to invest, it can't hurt to show them the math and let them make their own decision.....

Saskatchewstachian

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Re: I'm invested with a 2.89% MER and didn't know it!
« Reply #6 on: May 04, 2017, 11:47:03 AM »
UPDATE:

Well it took wayyyy longer than it should have but I finally got around to closing the account and transferring everything to a self directed RRSP.

Although there were significant fees that had to be paid by leaving before 7 years it still made sense. The one upside is that while I had the money in there it returned 15% between last August and today. So although it was not a great long term investment due to the high MER it wasn't too horrible over the past 10 months.

RichMoose

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Re: I'm invested with a 2.89% MER and didn't know it!
« Reply #7 on: May 04, 2017, 02:01:42 PM »
Thanks for the update! This should pay off big for you over the long run.