Introducing Invisor for Goal-based Portfolio Management

by Invisor Last updated on October 31, 2014 Tags: Retire Early, Big Purchase Tips, Debt-Free Education, Market & News Updates

It was in the summer of 2013 that I was planning to get a new mini-van to replace my old workhorse. I’d set up an appointment with a personal banking associate at my bank to review the various financing options available to me. As the meeting was wrapping up, the associate told me that I was ‘eligible’ for financial planning services offered by the bank.

I wondered what made me ‘eligible’ and upon enquiring, I was told that the balances that I had saved up in my children’s RESP accounts along with my RRSP account (all, self-directed by me) over a dozen years after immigrating to Canada were ‘sufficient’ to work with an advisor. At that moment, I simply let her know that I wasn’t interested and thanked her for offering the services.

This experience stuck in my mind and kept bugging me for the next little while – why should someone need to be ‘eligible’ to access investment advisory services? What happens to people who don’t have ‘sufficient’ money saved to work with an advisor? I feel fortunate to have spent a long time in the investment industry that I can manage my own portfolio effectively – but what happens to the rest of the people that need help with planning and investing to realize their financial dreams? I called the associate at the branch and requested an appointment with the advisor.

Issues in the investment industry today
After I went through the experience of working with the advisor over the following few weeks, I realized the significant challenges that consumers face in the financial advice marketplace.

Five issues jumped out at me:

1. Lack of Access:
Not everyone has access to a professional advisor given the minimum investment thresholds below which clients are not profitable to the advisor. In my case, I had to save for over 12 years of my working career to be considered ‘eligible’ for the service;

2. Biased Advice:
Where people get to work with an advisor, the advice is often biased because the advisor is either employed by fund companies (with greater incentives to sell in-house/proprietary products) or the advisor is paid a commission for the products sold, or is paid based on the transactions generated within the client account. When I first received my portfolio recommendation, it only comprised of in-house mutual funds. When I asked for inclusion of low cost products such as exchange traded funds, I was told they did not deal with such products (i.e. such products typically do not pay any commissions to the advisor);

3. Expensive:
Cost of financial advice is high and in many cases, upwards of 2.25% per annum (that too in a persistently low growth, low return environment). The average cost of the portfolio recommended to me was 2.30%;

4. Lack of Transparency:
Since most costs of investing are buried inside fund products, investors are generally not aware of what their total cost of owning the investment portfolio is, how and how much advisors get paid, the basis for inclusion of securities in the portfolio, how the portfolio is tracking towards their goals, etc. In most cases, what the investor receives is a simple monthly/quarterly statement of holdings that shows current market value, book value, and a list of transactions – no more!; and

5. Inconvenient:
The initial interaction with the advisor is a fairly long drawn out process to go over investment goals, portfolio recommendations, changes, review of plan, etc. Many times, setting up meetings with the advisor gets challenging due to conflicting schedules. And once a prospect becomes a client, the interaction with the adviser generally wanes until such time that the client calls the advisor for a certain need or the advisor gives a courtesy call once a year, in order to comply with the ‘know your client’ rules.

Time for change?
Technology has evolved and disrupted so many other industries – newspapers, travel & tourism, book publications, and now banking (think - what is the future of a physical bank branch?), just to name a few. Isn’t it ripe for the financial advice industry to undergo changes as well to make it a better marketplace for the end investors from a client experience perspective – especially for those in the mass affluent/retail category (with less than $500,000 of investable assets) that are not considered ‘High Net Worth’ by the industry? What options do they currently have other than to be ‘sold’ high cost mutual funds that are either manufactured by the advisor’s employer or where the advisor is compensated by the mutual fund company?

Following a meeting with a friend of mine (now my business partner!), we quickly came to the conclusion that there was a significant opportunity to serve investors. Dan & I considered ourselves lucky to have had the experience of working at large institutions in order to understand the mechanics of building a business leveraging technology to serve a larger cause. We decided it was time to take the plunge!

Introducing online advice
Invisor Investment Management Inc. was established to provide personalized, goal-based portfolio management, financial planning and insurance solutions to all investors in Canada primarily through an online channel. As an online investment advisor, our goal is to provide services to all Canadians with no minimum investment thresholds, at a fraction of the cost that exists in the industry today. We also keep our investment advice free of any conflicts of interests (no ownership in Invisor by any fund company, no sales commissions accepted by us from fund companies for products selected by us for our client portfolios) and provide full transparency to our clients on the total cost of owning the portfolio.

To be fully aligned with our clients’ best interests, we work hard to earn a fee directly from our clients, as opposed to getting paid by fund companies in a non-transparent manner for products included in client portfolios, or based on trades generated therein. This enables us to construct portfolios with products that are best suited to meet our client needs from a wide variety of low cost fund products (with strong track record) available in Canada. We leverage technology to provide a superior client experience, keep our service levels consistent across all our clients, and push costs lower so that our clients benefit over time.

Our service offering is currently under beta testing and will be launching very soon. We encourage you to sign-up for our newsletters and updates so we can let you know when we do launch our services.

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