Jul. 19,
2006
By Ellen Roseman
Bye-bye, CIBC Investor's Edge. You were my online broker
and you were convenient. But you gave me few tools to
use to measure my performance. So, I'm moving on.
I've found another online broker that will tell me the
cost price of each security, the gain or loss since
purchase and the annual rate of return on my portfolio.
Is that too much to ask? I need to know how well I'm
doing. And I wanted you to help me.
Rob McLeod, a CIBC spokesman, says online clients can
use a portfolio tracker at the site. "We have five
portfolios available, each capable of holding a maximum
of 10 securities," he added. But that's a pretty
small number. Once you get past 10 securities, you can
no longer see the return on your whole portfolio. And
it's your responsibility, not the broker's, to do the
work of entering all the securities and initial prices.
McLeod said a more robust portfolio-tracking tool is
in the works.
You'll be able to see the performance of individual
securities and the entire portfolio, not only since
inception but over selected time periods, and to compare
your portfolio with a model portfolio or specific index.
Sounds good. But I have no idea when this good stuff
is coming. So, I'm saying sayonara.
Chartered accountant Warren MacKenzie spent more than
20 years in the brokerage industry. "I'd go through
calculations to show clients how they were doing,"
he says. "Then, I'd ask the firms I worked with
why they didn't do it.
"They always said it was a top priority and they
would get to it right away. But it never happened. Then,
I started to think they really didn't want to do it."
MacKenzie now runs Second Opinion Investment Services
Inc., where he looks at your portfolio and tells you
what's right or wrong. As a fee-based adviser, he sells
no products or services except his ability to analyze
your asset mix and risk level in an objective way. "I'm
trying to establish myself as an advocate for the average
guy," he says.
So, he has started a campaign, urging the Ontario Securities
Commission to bring in compulsory performance reporting.
He wants investment dealers to provide the percentage
change in value, over specific time periods, of all
the funds an investor contributes to an account, and
an appropriate benchmark against which the performance
can be measured. At the website ShowMetheReturn.ca,
there's a petition you can sign and a rate of return
calculator you can try. The calculator, put together
by MacKenzie's son, shows the internal return on a portfolio
(known as the dollar-weighted return, as opposed to
the time-weighted return).
About 15 other fee-based advisers have joined in this
initiative. ShowMetheReturn.ca provides links to their
websites, so the advisers can raise their profiles while
championing a good cause. Why has the industry dragged
its feet on this issue?
"The fees are very high on some portfolios I see,"
says MacKenzie. "Big firms would lose business
if people could see they weren't meeting their benchmarks
because of fees."
Andrew Teasdale, an investment consultant in Toronto,
thinks performance reporting is more than just providing
information. "Once brokers start reporting performance,
they have to explain it. The industry knows this will
open a can of worms."
Performance reporting has the potential to be a catalyst
for change within the industry, he says. That's why
it's feared. Dalbar Inc., an investment consultant,
did a survey last year that compared the statements
of about a dozen full-service brokerage firms. "Not
one of them had any historical information, with either
percentage rate of return for the portfolio or dollar
amount," says Mark McDonald, a Dalbar spokesman
in Toronto. "Brokers are happy with the status
quo. Maybe this website is going to be the impetus for
change."
CIBC Investor's Edge will improve its tools eventually.
Other investors will vote with their feet, as I did.
But investment dealers may move a little faster if they
see their clients signing petitions and lobbying the
securities regulators for change.
You wouldn't drive a car without headlights or brakes.
You wouldn't go on a diet without weighing yourself
on a scale. So, why would you let someone sell you investment
advice and not provide any way to measure your progress?
Knowing where you're going and how you're doing is
part of the service you pay for. So, let's make sure
the industry tells us.
For more information, please visit
Second Opinion Investor Services.
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