Evaluating investment advice is a difficult but necessary step on the path to your financial success. This fourth post will complete our discussion of investment services that have hard-to-quantify benefits.

Reviewing Your Portfolio Performance Annually

This may come as a surprise, but a lot of investors don’t track their portfolio returns regularly. Competent financial advisors, however, will review your portfolio performance regularly. Since returns can be calculated in many ways, the first step in doing this is to determine the appropriate method of calculation. The second step, of course, is to actually calculate the return. Third, this return must be compared to a benchmark to determine whether the return is satisfactory. The traditional benchmark is a composite index that reflects the portfolio’s asset mix. This makes it possible to look at whether your portfolio is tracking the market. To illustrate, if the asset mix is 50% Canadian stocks / 50% Canadian Bonds, then the benchmark would be made up of 50% S&P/TSX Composite Index / 50% FTSE TMX Bond Index. Another way to benchmark your return is by measuring whether you’re closing in on your financial objective. For example, if your goal is to have $850,000 in assets by 2024, and in 2016, you have moved from $550,000 to $625,000, you probably had a good year.

Integrating Portfolio Management with Financial and Tax Planning

No advisor, no matter how skilled, can control the short-term returns of your portfolio, which depend entirely on what the markets do. But under any market conditions, financial planning helps you set financial goals in terms of your well-being that are more meaningful to track than the market’s rate of return. Integrating financial planning and portfolio management together helps set the right objectives for you and lets you better evaluate your portfolio’s performance. In addition, when tax planning and portfolio management are done under the same roof, it is common to uncover additional tax credits and other savings.

Harvesting Tax Losses

Throughout an investor’s life, capital gains are occasionally realized in taxable accounts. After market corrections, securities can often be sold at a loss to allow the investor to reclaim the accumulated capital gain taxes paid in the previous three fiscal years or to use them against future taxable capital gains. A competent investment advisor will systematically review your portfolio after market downturns, and realize losses if this will allow you to recoup some money from the government. Afterward, the advisor will replace the security sold with another one (tax laws don’t allow you to repurchase the same security immediately) that provides you with similar market exposure.

Locating Assets

Asset location involves finding the most tax-efficient account for each holding in a portfolio. Various types of investment returns are taxed differently. Interest income from bonds and dividends from foreign stocks are taxed at the full ordinary income tax rate. But dividends from Canadian corporations and capital gains receive a preferential tax treatment, in the form of the Canadian dividend tax credit and the (currently 50%) inclusion rate on capital gains. At the basic level, asset location services “relocate” asset classes that don’t benefit from preferential tax treatment into your tax-deferred accounts (such as your RRSP) and those that do benefit from a preferential tax treatment into a taxable account (such as your Canadian dollar account). In a nutshell, you can obtain a higher after-tax rate of return by locating the right investments in the right accounts.

Providing and Executing a Withdrawal Strategy for Retirees

Retirees are frequently concerned about securing a sustainable financial future. A sound withdrawal strategy helps them get the most out of their portfolio without outliving their money. It will also minimize the investor’s tax bill by carefully withdrawing the right amounts from the various taxable and registered accounts.


The last two posts have touched on nine services with hard-to-quantify benefits. In the next post, we’ll discuss services for which a dollar value can be estimated.

Other post in this series