Where can you get professional financial advice when you have less than $200,000 to invest? Here are three great bets

The value of good investment advice has been amply demonstrated during the market’s stomach-churning ups and downs that we’ve seen during the pandemic.

But getting that good investment advice at the right price isn’t easy for smaller investors who might have only $ 100,000 or $ 200,000 to invest.

Traditionally the main advice option for small investors has been relatively expensive conventional mutual funds purchased through a full-service adviser. They can be well worth it if you need and get the service you pay for, which should generally include a full financial plan.

But if that’s not what you’re looking for, conventional mutual funds are pricey and you should consider other options.

It turns out that one of your best alternatives to get advice from as a small investor is a little-known niche in the financial world. There you’ll find three respected direct-to-investor mutual fund firms that provide high quality investment advice and far cheaper fees. They can save you a bundle if you don’t need the full breadth of services expected from conventional mutual fund advisers.

The firms are: Steadyhand Investment Funds, Leith Wheeler Investment Funds, and PH&N Investment Services. They are well-established and highly respected, but are smaller organizations without large marketing budgets and therefore aren’t household names.

While conventional mutual funds will typically cost around two per cent per year in fees for a balanced portfolio of stock and bond funds, these direct-to-investor mutual funds come with excellent investment advice but typically only charge around 1.0 to 1.5 per cent in annual fees for a balanced portfolio. That adds up to a huge fee difference when compounded over many years of investing.

While they stop short of providing the full financial plans that are generally expected from conventional full-service mutual fund advisers, the quality of the investment advice they provide is first-rate. Sandi Martin, certified financial planner and partner with Spring Financial Planning, is familiar with two of the three firms, Steadyhand and Leith Wheeler. “What stands out about them is how reasonable their fees are and how well they provide service,” she says. In my view, a similar assessment also applies to PH&N Investment Services.

These firms have experienced, well-qualified advisers ready to help you by phone and online, although generally not face-to-face as is common for conventional advisers (in non-COVID-19 times).

Getting good advice at a moment of financial crisis is of critical importance, and each of these firms earned a reputation for being there for clients during the market meltdown in February and March. At PH&N, for example, the firm was able to maintain its service standard of answering 90 per cent of calls within 15 seconds, and even initiated proactive outbound calls to check on some its senior clients, says Mark Neill, PH&N Investment Services president.

Advisers at each of these firms can help you create a portfolio that matches your objectives, risk tolerance, time horizon and other financial circumstances using their firm’s lineup of mutual funds, similar to what conventional mutual fund advisers generally do. You can also buy their mutual funds through a discount brokerage account, although in that case they don’t come with advice.

While these advisers won’t prepare a full financial plan for you, they can refer you to a qualified financial planner who can do it on a fee-for-service basis.

Other choices

If you’re a smaller investor looking for even lower fees while still getting some investment advice, another good option is going with a robo-adviser to manage a portfolio of ETFs. Contrary to the robotic image, robo-advisers come with limited amounts of well-qualified human advice, although they emphasize digital service and automation of routine administrative tasks. You pay even less in fees than direct-to-investor mutual funds — typically about 0.7 per cent to 1.0 per cent a year (including ETF fees)- but you also generally get less human care and attention. “It’s like the economy version,” says Martin. “That’s how they keep their prices low.”

While it can also make sense for larger investors to choose direct-to-investor mutual funds, it should be recognized they also have other options beyond the reach of small investors. These include brokers (typically going by the title “investment advisers”) and portfolio managers (also known as “investment counsellors”), although they often have account minimums of $ 500,000 or more.

Now let’s consider the distinctive approach taken by each of the three direct-to-investor mutual fund providers.

Steadyhand

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Steadyhand is probably best known of the three, based on the media presence of its co-founder and chair, Tom Bradley. Bradley writes regular newspaper articles and is frequently quoted in the media (including in my columns). Bradley and his colleagues have created an investment firm that embodies the approach to investing advocated in his commentaries — experienced and savvy in confidently helping you navigate markets, but also careful with risk-taking and even-keeled-essentially a “steady hand” to guide your investments.

Bradley has had a distinguished career in the investing world — including a stint as president of PH&N-and he has recruited an experienced team dedicated to building a different kind of investment firm.

Unlike normal firms, making lots of money doesn’t seem to be a primary objective. “It doesn’t get us up in the morning,” says David Toyne, Steadyhand’s chief development officer, and a former president at two other major financial firms. “To be perfectly blunt as a senior shareholder of this company, we’re not built for profit. We’re built to educate Canadians to become a little bit better at investing their money. We want to change the (investing) landscape.”

Steadyhand offers eight mutual funds. Rather than managing the underlying investment funds directly, Steadyhand instead relies on top-notch sub-advisers with proven track records. Steadyhand is agnostic as to what investment approach each fund takes, although the common denominator is relatively concentrated portfolios distinct from general market indices, which it calls “undexing.”

Its flagship is the “Founders Fund,” a balanced fund that draws on other Steadyhand funds. Bradley leads the effort to adjust its asset mix based on market conditions. Toyne says it provides clients with peace-of-mind by leaving the sometimes stressful process of rebalancing to Steadyhand. As he explains to clients: “This is Tom’s full-time job. You don’t have to worry about it because Tom worries about it for you.”

Leith Wheeler

Leith Wheeler is a reputable investment management company that is known for its mutual funds sold through multiple channels and for managing money for pension funds and other institutions. Their direct-to-investor mutual fund service is a very small part of their business.

Leith Wheeler takes a “value”approach to investing. While value is a highly respected investing style that has performed well over long periods of time, that style has lagged the market in recent years and therefore the performance of Leith Wheeler’s funds has also tended to lag. “It’s been a challenging period,” says Karey Irwin, vice-president. “We do feel at some point markets will turn and value again will perform very well.”

Leith Wheeler has an exceptionally well-qualified team of five advisers. Four of them have the highly-respected chartered financial analyst designation. Clients get a designated adviser assigned, but can also get support from the rest of the team if their adviser isn’t available.

PH&N Investment Services

PH&N Investment Services is a small unit in the huge RBC financial empire. PH&N was a storied independent financial firm founded in 1964. It was acquired by RBC in 2008, but has retained aspects of its independent small firm culture.

PH&N offers a lineup of 200 RBC and PH&N mutual funds, with lots of choices among different investing styles and asset classes. PH&N advisers play an important role in navigating this lineup and finding the best PH&N/RBC mutual funds for each situation. This vast selection is particularly useful to investors who want to supplement holdings in core asset classes (typically Canadian investment grade bonds, as well as Canadian, U.S. and international large-cap holdings), with smaller positions in niche asset classes (e.g. high-yield bonds, global bonds, small cap equities, precious metals equities). “That breadth of choice is really a differentiator,” says Neill.

Included in the PH&N lineup are passive index mutual funds. If you prefer to take a passive approach to investing, you can construct a balanced passive portfolio using mutual funds that is roughly comparable in fees to what you would pay a robo-adviser to do so using ETFs.

David Aston
David Aston, a freelance contributing columnist for the Star, is a personal finance and investment journalist. He has an M.A. in economics and is a Chartered Professional Accountant. Reach him via email: davidastonstar@gmail.com

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