With more capital to manage and higher taxes, affluent families need to optimize the structure of their portfolio to avoid any drags on performance.
While affluent families enjoy a greater variety of investment options, having more to invest means that even slight portfolio under-performance can lead to substantial dollars being lost over time. Here are some of the more common under-performance pitfalls:
Are you amply diversified?
- Does your portfolio go beyond the traditional allocations to bonds and stocks?
- Does your asset mix incorporate material exposure to markets outside of Canada?
- Does your investment strategy capitalize on the full breadth of the credit spectrum?
- Does your portfolio incorporate exposure to dimensions of the market that have the potential for long-term outperformance?
- Does your asset mix include alternative asset classes?
Have you rid your portfolio of all unnecessary costs?
- Do you know how much you are paying in fees?
- Do you know how much you are paying in hidden costs such as trading commissions?
- Does your portfolio incur unnecessary costs due to higher turnover?
- Have you grouped family members’ portfolios together to potentially reduce fees?
- Are your pooled investments (funds, ETFs, etc.) selected with cost minimization in mind?
Have you structured your portfolio to maximize after-tax performance?
- Do you know how much in taxes your current managers are incurring?
- Does your portfolio use tax deferral vehicles such as corporate class shares?
- Do your bond and equity investment strategies incorporate tax reduction as a parameter?
- Have you taken family members’ tax profiles into account in constructing a tax-effective portfolio?
- Is your portfolio rebalancing undertaken in the most tax-effective manner possible?
- Have you structured your investment management arrangements to maximize deductibility of fees?