Hi guys,

I've been talking a bit with a financial advisor about letting him manage a good chunk of money for me and I'm looking for a little review of what he's suggested.

I'm in Vancouver, BC so it's going to be mainly Canadian and I don't know what standard fees are for an account my size nor if what he's suggesting is optimal given the current world state of affairs.

Here's what he's proposed:

We're looking at investing about 700k CAD and he proposes splitting it up as follows.

Allocation/Investment Type

35% Barometer Capital High Income Portfolio

35% Fixed Income (high quality bonds and prefs)

30% Alternative Strategies (mortgage pools, higher yielding fixed income)

100% TOTAL

Expected Returns (respectively):

13.80% *

3.50%

7.00%

For an average of
8.10%

* Return since inception

Here are the fees associated with each.

Barometer Capital Portfolio 2.00%
Fixed Income 1.25%
Alternative Strategies 1.25%

For an average of 1.51%

He tells me that all of the fees paid will be tax deductible.


Now, here are some of the questions or concerns I have.

The first thing that jumped out at me was paying 1.25% for the fixed income investments of only 3.5% expected return. He told me that 1.25% is just the fee for what he's actively managing and that having such a large chunk of money in fixed income such as bonds is just his opinion of where it should be right now given the current market and that that would likely change with market conditions and if it gets to being more actively managed the fees would remain the same.

Second is, well, why Barometer Capital? Anyone know anything about these guys?

I asked for some other possibilities to compare with and decide between and he's sent me a few. I can put them up here later if that seems necessary.

Anyway, I suppose that's it for this first post.

Mostly just looking for an opinion on the overview. (and is 1.51% a standard amount to pay on an account this size?)

Thanks for any thoughts.

Since 1988, the S&P 500 had an 18% yearly average return. The VFINX broad index mutual fund tracks the S&P 500 and you only have to pay 0.14% in fees. Why would you pay more fees for lower EV?

Even if you are about to retire and are risk averse, there are better options.

None of this makes sense.

1. Almost nothing has an expected return of 13.8%, especially high yield + other fixed income + hybrids. I don't know anything about the fund/mgrs itself. Using historical returns to project future ones is really just lol.
2. Paying 2% for such a strategy makes no sense.
3. Why is "alternative" only charging 1.25%. I would expect this to be the highest fee for whatever private mortgage investments or whatnot.
4. No mention of risk or liquidity

fees are high but nothing ridiculous

I also forgot to mention, what is this lack of diversification across asset classes

Those fees are really high. From what I found online the Barometer fund has a front end load. That's never good.

disagree but that's a different story.

"35% Barometer Capital High Income Portfolio"
From their site:
Income, income, income.

"35% Fixed Income (high quality bonds and prefs)"
Question what he means by 'active management' for high quality bonds (or fixed income in general). Bring up purchasing the fixed income in a separate non-managed account.
Income, income, income.

"30% Alternative Strategies (mortgage pools, higher yielding fixed income)"
Income, income, income.

From your 2+2 profile you're 31yrs. old? Is there a specific reason you're looking for so much income instead of appreciation?

1.5% fee for a managed account is standard but I bet you could negotiate it down, however think about separating the fixed income from that fee... a 1.5% fee for fixed income is high.

Show this thread to that financial advisor guy. He'll be in for a handful.

I mean no disrespect to the financial advisor.
He's got all the information so he could be spot on. And I like the fund.
It's really easy to poke holes in investments.

But yeah, he'd be in for a handful.

Each financial 'advisor' has to pitch their product as better than all the others in the market. They profit from fees made for their services. I would rather trust a hedge fund who has his own capital invested together with his clients and receives low fees for his services.

Try watching Timothy Sykes' view on the whole financial 'industry'. He basically says it's all a sham and a joke.

yeah, but OP doesn't have enough for a hedge fund.

This geai is a scam artist, yet he is also a perfectly legit financial advisor in the eyes of mainstream society. The only thing super likely to hit in that epic fail of a gamble is the 3.5% return of the bond fund. The only thing guaranteed to hit is his 1.51% fees taking half your profit. The other two variables in that equation are big ol' gambles, particularly in the short run. Predicting 18% in the short run is lol. Can also be -18% or +23% or -40% or +10% or -100% (not good) or whatever. Yes, it is probably more likely than not to average out to be a positive number (particularly over many decades) but what is your time horizon for this investment ? What is your risk tolerance? These are two EXTRRMELY important pieces of the puzzle and they are not mentioned. Did he mention those things at all? Have you considered taking it to a casino and betting it all on black? I can do it for you and likely get you a 99% return on your $ as I will only charge you a 1% fee.

Oh and in this economic climate, it is better to be liquid. Wait it out for a while, the bubble in the markets around the world is gonna burst sooner or later. Wait for it.

Nothing like watching my money lose value because I kept it liquid. There are still very conservative investments that are worth the minimal risk compared to cash.

Let's clear something up OP, did he say that you could expect a 13.80% return from that fund?

I wouldn't normally say something like this, but OP for your own good and the love of god ignore the poster above me. He probably hates his life with his view of the world.

edit: two above me now since someone posted while i was posting

Yup, but getting tied up now loses you the opportunity on making bigger returns when the bubble bursts. Wait it out. Bubble will definitely burst. But when, I have no idea. Dont get impatient tho.

You can find a better opportunity than this. But now is not the time.

Anyway, its your money. Try out Barometer and see what happens. It might be a good deal after all, who knows...

Wtf? You saying OP should risk his money and go with it blind?

And I love my life just fine. I got a lovely wife, a loving little boy, a good home and family and friends to support me. What do you have?