Today I had one of my periodic opportunities to help out a relative with some aspect of their financial holdings, in this case arranging a lump sum withdrawal from an RRSP.
The resulting issues with partially conflicting parameters represent what I had to consider frequently over recent years as a financial consultant, and still do pro bono for a few relatives.
It seems just about anyone by now involved with monetary investments understands that there are “Know Your Client” concerns in transactions, thanks to regulatory requirements. In part this means when a client wishes to make a partial redemption, particularly with the advice of their financial advisor, internal institutional compliance is in the picture. This in turn means the transaction needs to factor in, so as to help the client maximize results while remaining compliant, issues such as:
- Are any redemption fees applicable in the suggested source Fund mix? Avoid this if at all possible.
- Are there other benefits to taking out one kind of units versus another? Many institutions have a variety of units available for the same investment Fund, with comparative advantages insofar as fee rebating versus underlying annual MERs, etc.
- How is the risk profile impacted by the redemption schedule? Assuming no other general changes are being contemplated for the investment mix, including tangential influences such as geographic concerns or payout schedules, the resultant mix still needs to keep within the parameters of the risk profile on record. It may be that, for instance, due to fees or short term capital preservation a more conservative withdrawal mix is recommended which needs to be offset by switches from more growth oriented holdings to bring the profile back into line.
Sometimes clients don’t want to focus on these issues. The professional financial advisor can’t take a position of indifference. He or she has to act responsibly and ethically, even if it means gently browbeating a client into a sufficient range of cooperative awareness, which the latter will hopefully appreciate sooner or later.