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By: Brenda Bouw
You Ask, We Answer
Financial Post
March 9, 2002
Question:
Have any surveys been done this year comparing the costs of the
annual RRSP trustee fees for self-directed RRSP accounts with the
various brokerages and banks? I have read that many have been revised
downwards or eliminated -- is this true? Can you give any advice
on this topic as well?
Answer:
Adrian Mastracci, a fee-only investment counsellor at KCM
Wealth Management Inc. in Vancouver, says annual fees for self-directed
RRSP/RRIF accounts typically range from $100 to $125. However, read
the fine print, as you may face additional costs, such as withdrawal
fees and transaction fees.
Fees may reduce when you choose a total package of services. Some
negotiation may be required.
Mr. Mastracci tells his clients that this fee is no longer deductible.
He also prefers that clients pay it personally, rather than from
the account. It's important that the plan allows the investments
that you are likely to purchase, he says. For example, individual
mortgages may pose some difficulties.
He says an investor is fully responsible for all investment decisions
in self-directed accounts, perhaps with assistance from your investment
advisor. Mr. Mastracci suggests a $25,000 minimum for a self-directed
account.
He also reminds investors not to incur any more risk than necessary
inside the RRSP/RRIF. A loss cannot be offset against any gains.
Adrian Mastracci, president
of
KCM Wealth Management says, “An investor is fully responsible
for all investment decisions in
self-directed accounts, perhaps with assistance
from your investment advisor.”
Question:
When you and your spouse get to an average age of 80 years, should
you place half your money into annuities to reduce income taxes
and assure income until you both die?
Answer:
Mr. Mastracci says this would be one option for clients who fit
this category. "However, it is not my first preference."
Placing one-half of the clients' capital into annuities limits
flexibility and substantially reduces available capital, he says.
Further, the capital invested in annuities does not form part of
the legacy passed on to beneficiaries.
Mr. Mastracci counsels clients never to place income tax strategies
ahead of investment strategies in all undertakings.
Investing one-half of available capital into annuities is not a
reversible situation. Mr. Mastracci says having one-half of your
capital in one type of investment for the rest of your life dramatically
reduces diversification. It also limits your income options if your
situation changes for any reason. "My preferred option is to
design an appropriate income portfolio using a ladder of maturities,
say five to 10 years. This generates the required income, retains
the clients' capital and is sensitive to the clients' goals."
This approach allows his clients far more flexibility in the event
that their situation changes, say due to higher inflation, health
reasons, family needs or the death of one spouse. Mr. Mastracci's
preference is for clients to retain as many investment options as
possible.
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