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If you have investments with different investment firms and financial institutions, you’re not alone. It can happen pretty easily. Maybe you have a Registered Retirement Savings Plan (RRSP) from your first place of employment and a Registered Education Savings Plan (RESP) you opened at your bank. Perhaps you bought some stocks at a discount brokerage. The problem is, scattered investments are troublesome to manage, and the lack of coordination can make it harder to reach your investment objectives. Here are five reasons you may want to consolidate your investments.
It can be quite frustrating to pore over several statements from different financial institutions in an effort to grasp how your investments are doing. When your investments are in one place, you enjoy the simplicity of seeing investment performance on a consolidated statement.
Tax time is stressful enough without investment information spread over multiple tax slips from several financial institutions. You and your accountant will have a much easier time when investment purchases, income and expenses are all presented from one firm. Consolidation also makes it easier to spot opportunities for tax-loss selling — that is, liquidating non-registered investments to trigger a capital loss that can offset taxable capital gains. Weighing gains and losses can be far more difficult when you need to gather information from multiple statements. In addition, implementing buy and sell orders is likely to take more time when you are dealing with multiple institutions.
When you hold accounts at several institutions, you could be paying multiple administration fees. Consolidating not only eliminates duplicate fees, but you may also qualify for lower investment management fees once your assets reach a specified threshold.
Your portfolio’s asset allocation is customized to your personal risk tolerance and designed to meet your investment objectives. Assets are fully diversified to minimize risk and maximize potential returns. These two factors — asset allocation and diversification — are easier to manage when investments are under one roof. With all your investments at one firm, duplicate securities stand out on your statements, and you can see at a glance if you are overexposed to one asset or sector. It also facilitates rebalancing, which is critical to maintain your customized asset allocation. On a periodic basis, your holdings are restored to the original proportions of equities, fixed income, cash and any other asset classes. Typically, this involves selling securities of outperforming asset classes and buying securities of asset classes whose prices have fallen — so it’s also a disciplined way of selling high and buying low.
Having multiple investment accounts often means dealing with multiple advisors. This can lead to difficulty when you need to bring in other trusted consultants, such as your lawyer or accountant, to work with your financial advisor. If you currently have legacy investments spread out all over the map, we’d be happy to explain what’s involved in the consolidation process.
Your retirement success depends on the strategic management of the different types of investments that make up your nest egg. These include:
All of this requires orchestration, which can be difficult when investments are spread among different banks, investment firms and financial institutions.
Estate planning, too, can be easier when you have the support of a single advisor. When you can view all investments together, it’s easier to plan for the distribution of assets. You also smooth the way for your executor, trustee or liquidator to administer your estate.