|· Account Administration
· Understanding Your Annual Report
· Understanding Your Monthly Statements
· Internet Technology
Client portfolios are maintained at National Bank Correspondent Network. The country’s largest discount brokerage offers low transaction costs for buying and selling securities. Its investor services are on the leading edge in the financial community.
We have access to your account information at all times via a secure website at National Bank Correspondent Network. We receive the month-end statements for all accounts on, approximately, the tenth of the following month. Over the ensuing days, we go through every statement for an in-depth review of the portfolios’ positions and activities.
We look for:
- Excess cash and Money Market holdings
- Foreign content status for RRSPs
- Maturing investments in the upcoming month
- Adherence of the portfolio to the allocation plan
- Completion of buy or sell orders initiated during the previous month
- Status of execution of “proposed changes” agreed upon in the last Annual Report
- Status of execution of “approved buy list”
- Successful processing of any deposits, withdrawals or transfers during the previous month
- Other activity in the month
- Movement in market value of direct equity holdings
The TRIVEST Status Report keeps track of the status of every account. It is updated periodically during the month as events unfold; however, the major updating results from the Month-End review above. This report thus directs the account management and administration for the next four weeks, when the process begins anew.
Depositing Funds Electronically to NBCN
There is a new option for depositing funds electronically to your NBCN Cash Trading Account if you already are an online banking customer.
- In your online banking account, go to Payees (as if you were setting up electronic payment for your Telus or BC Hydro account) and type in NBCN, which then should come up as an eligible payee
- In the account number box, enter your NBCN account number which starts with 6C57 and ends with the letter A
- Then let us know you are transferring funds to your NBCN account so that we can catch it sooner
This facility is only available to transfer funds to your Canadian $ Cash Trading account. If you are wanting to make an RRSP or TFSA contribution, you must still transfer the funds to your Cdn $ Cash Trading Account, and we will make the contribution for you. Please call or email us if you have any questions.
You receive our Annual Report on a twelve month fiscal period, which derives from your start-date with us. Typically, the report is sent to you 30-45 days after your year-end.
The strategy for your invested funds is first described in words, as to the purpose of those funds to your life:
|“The strategic plan for your portfolio was conservative growth through retirement,
and the funding of tax payments and monthly cash calls of $3,000.”
We report the status of our adherence to the Asset Allocation Plan you charged us to observe:
We report the value of your total portfolio at Report Date, how much investment income was earned and what the time-weighted rate of return was for the year:
|“The portfolio totaled $1,365,722 and earned $71,338 (8.07% before fees-see below).”|
We report the average, annual compound return over various time periods, including from your start-date:
If you have a formal Financial Plan prepared by us, inherently, it has a long term compound rate of return built in to it. We report that figure, which can be compared to your long term inception return with us. Note that long term returns are just that—long term! If your inception return with us only represents a few years since you joined us, then comparing short term past returns with forecasted long term future returns likely is not very instructive.
If you have been with us for a few years, we include a two-scale chart which shows, on the left scale the dollar value of your portfolio, and on the right scale both the annual and running compound returns since you started with us. Return data is always flavoured by the time period involved: the markets in any short period can be skewed: good or bad! If you have been with us for many years, you will see in this graph: a) the annual returns jump up and down a lot and b) most importantly, the running compound return tends to settle, and at a healthy level.
If you are not inclined to financial matters, you can stop reading your Annual Report at the Summary level, and have a good handle on how your portfolio is doing, or carry on…..
At the back of the Report are the detailed sheets we prepare to support your Annual Report. In there, you can see all of the activity that happened in each of your accounts, security-by-security. Another set of graphs appear there, which are specific to each of your sub-accounts.
A very instructive graph shows the accumulation of your portfolio value across time, as to (bottom bar to top bar) a) your net contributions b) dividend and interest earned and c) price appreciation.
This is a chart to give to your children or grandchildren! It shows the value of investing! Visually, you can see that more than approx. two thirds of this portfolio’s accumulation over 18 years was the growth that ensued (18 year compound of 8.01%) from the investor’s contributions: he contributed $262,000 of the $719,000 portfolio value.
Fixed income portfolio
The fixed income component provides the safe bedrock of your portfolio against the vagaries of the stock market, and is typically 40-60% of our clients’ portfolios. We hold fixed income in a love/hate relationship: today’s low yields are a millstone to our overall portfolio return. But when the current 8 year Bull market collapses, perhaps in a single day, we gain appreciation for that bedrock. This precisely happened in the Fall of 2008. We have written extensively in our website Library about fixed income returns: they have two aspects: the long term return locked in to maturity, and the short term return reflected in the today’s marketplace. Your exposure to interest rate movements is reflected in the future maturity dates of your existing bond portfolio.
|“The fixed income component of your portfolio is invested to earn a long term weighted average return of approximately 2.11%. The one-year return on your fixed income portfolio was 2.75%. ”
We continue responding to the current low interest rate environment by a) keeping your average maturity period short and b) investing in alternative forms of fixed income.
|“We have attained a staggered bond portfolio which is laddered out at appropriate intervals through 2021. The average term to maturity for your fixed income investments is 28 months. We have responded to the present interest rate environment by investing 10% of your fixed income portfolio in alternate fixed income vehicles, which contributed positively to the one-year return.”|
The core of our equity management is monitoring the construction of your portfolio across the ten industrial sectors and across global geographic economic regions. Our proprietary systems allow us to analyze this with real time market pricing downloaded from the web.
|“The percentage allocations of direct equities invested in the various industrial sectors and world geographic zones are currently as follows:”|
In this section, we review the status of any annual contributions you ought to be making for tax purposes: TFSAs, RRSPs and RESPs. We maintain an annual Master Contribution Control List which monitors everyone’s contributions. We also address any pending withdrawals of funds.
“Your RRSP contribution status for the current year will be reviewed vis-à-vis your recent Plan, and is scheduled for August.”
“Your TFSA contributions for the current year are up-to-date.”
“Your annual RRIF payment is scheduled to occur in June.”
Your Annual Report typically takes 30-60 days to deliver to you. Occasionally, there has been activity in your account between your fiscal reporting period and the day we complete your Report.
|“A bond matured in March in your RRSP. Your Asset Allocation Plan called for the funds to be deployed back to Fixed Income. The iShares Canadian Government Real Rate of Return Bond ETF was purchased.”|
Significant events ahead
Here we contemplate significant changes on your horizon.
|“You are retiring in the next twelve months and we should commence planning your new cash calls for this.”
“You are in the midst of preparing a formal Financial Plan with us and we should await its conclusions.”
In this section, we address the ongoing appropriateness of your Asset Allocation Plan. Occasionally, it may be prudent to amend it somewhat in light of your changing circumstances. We then address specific changes in individual holdings, for purposes including a) rebalancing to your Asset Allocation Plan b) specific profit-taking in individual stocks c) specific profit-taking in specific industrial sectors which have out-performed the general market d) specific profit-taking in geographic regions of the world which have out-performed the global economy e) specific profit-taking in currency appreciation f) funding your pending cash calls.
|“We propose to maintain the same allocation plan for the coming year.”
“We will execute the following specific changes to your portfolio:”
In order to manage your wealth well, it is important that you keep us abreast of any significant changes in your world.
|“Please contact us if there has been a material change to your financial position.”|
Our management fee is calculated monthly and billed directly to the accounts quarterly/semi-annually/or annually, based upon the dollar value of your portfolio. In your Annual Report, we disclose our fees for your fiscal period in total across all of your accounts, based upon our Management agreement at the blended rate of .85/.6 of 1%. We aspire to deliver the best value in wealth management in Canada, predicated upon the integrated contributions of investment management, financial/estate/tax planning and accountability along with a low-fee structure.
|“Our consolidated fees for the reporting period were $3,882, which represented .69 of 1%.”
“We have mitigated the management fee costs by holding mostly Exchange-Traded Funds and direct stocks and bonds, with very few mutual fund positions.”
Our May Client survey revealed that 82% of respondents believe our value delivery is “excellent”.
Q: What is the purpose of an Asset Allocation Plan, and where does it come from?
A: We think asset allocation is the most important thing. It quantitatively speaks to your risk profile. In the longer term, the returns you earn should correlate with the risk profile you choose to take. You may choose to change this Plan over time in consultation with us. The Plan is documented and signed off by you in our client agreement forms. For many people, the Plan comes from a detailed long term Financial Plan, which they may have done with us or elsewhere. Otherwise, it is derived from conversation with you and from soul searching your own attitudes towards money and considering what the money is for.
A: We report to you the compound return since you started with us. If you have had a long term Financial Plan prepared, then there is a long term rate-of-return implicit in that Plan that helps you live out your life to a desired standard. We believe that a good compound return is one that approximates, or exceeds, the return implicit in your Plan. If your spending habits also approximate your Plan, then life should play out nicely. Ideally, such returns could also be benchmarked against some external index. Practically though, it is difficult to construct a benchmark which fairly stacks up against one’s own portfolio.
A: Your return is calculated by the fraction of the income earned in the portfolio divided by your “invested capital”. The income includes dividends and interest. Some of the interest is received in cash and some is “accrued” into the growing value of a strip bond. The income also includes appreciation or depreciation in the value of your holdings, whether those were realized through a sale or remain “unrealized” on paper. Your invested capital starts with the opening invested amount and time-adjusts through the year for any contributions or withdrawals of funds.
Q: What does “compound return” mean?
A: This is the average return PER YEAR that you have made for some period of time, eg 3 years, 5 years, etc. It is algebraically derived from the collection of past “simple” returns.
Your compound return is a function of your Asset Allocation Plan, the vagaries of the market, the period measured in the compound calculations and the specific holdings and stewardship of your portfolio. The longer the compounding period, the more relevant it is to your investing success. The Historical Returns graph in your report tracks your simple and compound returns across the years.
Q: So…what’s important for me to know?
A: That’s up to you and your individual choice. At minimum, we want you to know how your money is doing—and that is told by the rate-of-return information we give, including, most importantly, your long term compound return.
If you are interested further, you can drill down to every level in your report that we drill down to in managing your money…right down to the annual and compound returns of every equity you own.
A: When you first buy a bond, you have locked in a guaranteed return rate for the life of the bond. This is the “yield-to-maturity”. We perform calculations that determine what your average yield-to-maturity is across your entire bond portfolio. This is useful in assessing what the “safe” part of your portfolio is giving you.
In the marketplace, the value of your bonds are constantly changing in response to present-day interest rates. Thus, the return for a single year (which we call your “current” yield) likely will be different than the yield-to-maturity. Again, we perform calculations that determine what your average current yield is across your entire bond portfolio. In some years, this return can be much higher than your yield-to-maturity, and this may be the backbone in your portfolio in a year when the equity markets are suffering.
Q: What are “funds”?
A: Funds are baskets of investments which allow an investor to get large degrees of diversification, even with small sums of money invested. Pretty much anything that can be bought one-off can be bought as part of a larger basket. These baskets can fulfill a multitude of investment objectives, including both “safe” investing (typically “bond funds”) and equity investing , either in a broad index (the 500 biggest companies in America) or specific niches, both sectorally (like the agricultural sector, gold, real estate) and regionally (Europe, Asia, Switzerland). Funds either come with active management (mutual funds) or passive management (exchange-traded funds).
A: One tracks your annual portfolio returns across the years, which we call “simple” returns. This number likely will bounce around a lot, reflecting the ups and downs of the markets. The other is a smoothing device which tracks the running compound return (see above) over your investing years with Trivest. This number will fluctuate much less and is a better indicator of how you are doing.
A: It’s that D-word-diversification. We have monitoring systems that track how your equity investments are distributed, and this system tabulates a summary which we include in your Annual Report. The sector analysis tells us how you are exposed to the different industry categories that make up the business world. Different sectors shine at different times, and so we want to be sure you are minimized when bad times hit and will also be there to enjoy good times. The international allocation attempts, albeit a bit crudely, to track how your money is participating in the different world economies. As companies become more-and-more global in scope, then pigeon-holing them based upon their head office or stock exchange listing locations becomes a bit arbitrary. That is why we reference “globally-distributed” in your report.
A: Many of our staff are educated and certified as financial planners (“CFP”). Don has served on two National Boards in this field and is a national Fellow. He is also a registered Trust & Estate Practitioner. We believe (and according to our recent survey, so do you) that all of these fields of knowledge are necessary and important to manage money well. So, day-to-day, as we oversee your accounts, we are bringing these bodies of knowledge to bear, when and where relevant. Most of this happens invisibly and seamlessly to you.
Understanding your National Bank statements
Portfolio Statement Information
You may have several accounts with NBCN, eg RRSPs, RRIFs, RESPs and Trading accounts. Statements are issued based upon the name(s) on the account(s), ie accounts in your own name solely will be separate from accounts held jointly with someone else, eg your spouse or adult children. Your Client ID# will start with 6C57, which refers to all accounts held at NBCN through Trivest, followed by two alpha letters, which is your unique number.
Inside This Statement
On the right is a summary of the accounts you have registered under your unique number.
The front page is a useful Summary, which lists all of your accounts by type, and shows the month-end balances at the start and end of the month, by account and in grand total. It also shows the cash balances in each account and in total. An important thing to note if you have a US dollar denominated account: it has been converted to Canadian equivalent in these figures, based upon the month-end exchange rate (which is disclosed in the right hand margin).
Portfolio Asset Allocation
On the surface, it would appear that this section provides some useful insight to your portfolio’s construction, including the respective allocations to safe vs risk-oriented investments. Unfortunately, the devil is in the details, and the background programming that assigns each investment to a particular category is simply not accurate; therefore, this area is not useable. For instance, some fixed income bond ETFs are assigned to common stock, and various stocks and fixed income are blended together in miscellaneous.
Our own proprietary portfolio management software manages this correctly, and we use this throughout the year on your behalf. This detail is imparted to you yearly in your Annual Report, and is available any time during the year, should you wish.
Following the Summary page, each individual account is explained in more detail……
Cash Flow Summary
This table summarizes the cash in and out by categories, both in the month and cumulative year-to-date. The categories include cash deposits/(withdrawals), investments (bought)/sold and income (dividends, interest and other distributions to you). Distributions refer to receipts from trust units and ETFs. Trivest fees are summarized year-to-date at the bottom of the chart.
“Would that it were simple…..” The cash inflow information from dividend and interest income can be misleading and, in particular, understated if you hold strip bonds, which are very popular in RRSPs. They only pay interest at the very end of the holding period. On the NBCN statement, all of the income they earned does not appear on the “interest” row but on the “investments sold” row. You will find the proper amount of interest earned on strip bonds in the Trivest Annual Report. For more information, visit http://www.nilsonco.com/investoru123456789/bonds_stripbonds/
Also, remember that your portfolio income is the sum of interest, dividends, realized appreciation and unrealized appreciation and foreign currency impact. The Cash Flow Summary only embraces the first two of those. Again, your Trivest Annual Report provides the full information.
This lists every security you own, by category, including a) how many units held b) average cost/unit, followed by total cost per security c) month-end market price, followed by month-end total market value and d) the percentage of that security to that account’s total value.
The details of the cash ins and outs appear farther along the statement by category, and indicate the specific source of every cash transaction within the month.
There is further information for sheltered accounts: RRSPs, RRIFs and TFSAs…..
About Your Registered Account
For RRSPs and TFSAs, this indicates your contributions to-date in the calendar year. For RRIFs, this indicates the present-year amount you are required to withdraw as well as how much has been withdrawn so far year-to-date.
Lastly, it also indicates your estate beneficiary upon your passing. Here, you may have named a specific person, or people, or your “estate”, the latter meaning that, upon death, your sheltered account will pass through probate. We have written previously in Insight on these topics, and you can review them in our Library at:
Annual Fees and Compensation Report
The new national industry regulation changes now include a separate, annual reporting of all fees charged by NBCN for each calendar year, by account. NBCN may receive compensation in either direct or indirect fashions. Direct fees are paid by you and indirect fees usually refer to payments received by NBCN from Third Parties (usually mutual fund companies by way of trailer fees). Note that Trivest specifically minimizes holding mutual funds on account of these trailer fees which are paid to NBCN. Transaction fees are related to security transactions of buys or sells during the year of stocks, bonds, ETFs and mutual funds. The total fees paid to NBCN are summarized at the bottom.
For tax-claiming purposes in unsheltered accounts, Trivest fees appear on the backing sheet which accompanies the T5 information forwarded by NBCN in February each year.
Our custodian, National Bank Correspondent Network, provides free access to your account and to other market information through their world wide web application called “MyPorfolio.”
Here you can find:
- Your account valued at the previous day’s close
- The last 60 days of activity for your account
- Real-time market quotes for stocks
- Economic and market outlooks
- The latest market news and price changes for individual companies, sectors and market indices
- Charts and financial reports for companies
If you would like to obtain access, please inform us and we will request an ID number and password on your behalf.
For immediate tech support, call 1-855-844-0172.
Our fees are based on a percentage of assets under management. We charge .85 of 1% on the first $100,000 managed, and .6 of 1% on the excess, per portfolio. Our fees are billed either quarterly, semi-annually or annually, based upon the size of the account, and charged directly to your account
|If you are unhappy about your portfolio…..If you are unhappy about some aspect of our management of your portfolio, please contact us by phone, mail or email on a timely basis and indicate:
We will acknowledge your communication within five business days. We may need to gather more facts from you and from our own records before we respond.
We will respond to your communication within 30 days, summarizing our understanding of the problem and your dissatisfaction, and our interpretation of a reasonable remedy.
If we cannot resolve the issue to your satisfaction, you may seek free independent dispute resolution assistance offered by a public entity called the Ombudsman for Banking Services and Investments (“OBSI”). They can be found at: https://www.obsi.ca/.
Alternately, you have the right to seek legal counsel or other ways of resolving your dispute. A lawyer can advise you of your options. There are time limits for taking legal action. Delays could limit your options for legal remedies later on.