By the Pratte Portfolio Management team
Approaching retirement, selling a business or managing a portfolio that has become difficult to monitor may lead you to entrust your investments to a professional team. How can you compare firms and find the right fit for your situation?
Returns deserve a place in the discussion, alongside the risks taken to achieve them, the fees and the services provided. Before making a commitment, consider these six points to understand how your wealth will be managed and what relationship you can expect with the team.
Define what you want to delegate
Start by clarifying the role you expect your manager to play. Do you want to delegate investment decisions? Plan retirement withdrawals? Invest the proceeds from selling a business? Your answers will help you compare services against a specific need.
With discretionary management, you authorize your manager to make investment decisions within an agreed mandate, without approving every transaction. The portfolio’s objectives and parameters should therefore be clear from the outset. The Portfolio Management Association of Canada explains how this works and the role of an investment policy statement.
Also clarify which services are included and which require another professional’s involvement, particularly for tax or estate matters.
Verify registration and experience
In Quebec, the Autorité des marchés financiers register allows you to check whether a firm or individual is authorized to carry out the activities associated with the service offered. Check both the firm and the professional you will work with, including the relevant registration category.
Next, ask about the team’s experience with clients in situations similar to yours. Find out who will make investment decisions, who your primary contact will be and how responsibilities are assigned. These answers tell you more about the service you can expect than a professional title alone.
Understand the approach and the risks
An initial meeting should help you understand how investments are selected and when the portfolio may be adjusted. Ask about the asset classes used, diversification, currency exposure and the role of cash.
The mandate should reflect your investment horizon, withdrawal needs and financial situation. Your tolerance for fluctuations matters, as does your ability to absorb a loss without compromising your plans. The AMF highlights the importance of this overall picture when selecting investments.
To make the discussion practical, ask how the proposed portfolio might respond to a sharp market decline and how your withdrawals would be funded in that situation.
Compare the full cost
Request a written breakdown of management fees and other applicable costs. Depending on the investments and the account, fund expenses, trading costs, currency conversion fees or administrative charges may also apply. Clarify what is included, billed separately or already built into the products.
An annual estimate in dollars makes it easier to compare firms. The Ontario Securities Commission provides a portfolio fee resource that illustrates the impact of fees. Then compare the total cost with the services actually provided and the support you need.
Evaluate performance in context
When reviewing a return, check the period, the currency and whether fees have been deducted. Ask whether the figure represents a fund, a strategy or a client account. Results can differ depending on the investments held, cash flows and account-specific circumstances.
A relevant benchmark helps put performance in context by comparing similar exposures and levels of risk. Review several periods, including challenging markets, to understand the consistency of the process and the size of declines. Past performance does not guarantee future results.
Clarify communication and asset custody
Before signing, agree on the communication you expect. How often will you discuss your portfolio? What information will you receive? How should you report a change in your circumstances? Retirement, a new family responsibility or an asset sale may call for a review of the mandate’s parameters.
Also ask which institution will hold your assets, how you will access your statements and what authority the manager will have. Transfer terms, potential fees and the process for ending the mandate should also be clearly explained before you open an account.
Questions to bring to your first meeting
- How does your proposal address my goals and liquidity needs?
- Who will make investment decisions and manage our relationship?
- What is the estimated total cost, as a percentage and in dollars?
- How will we measure the portfolio’s performance and risks?
- Who will hold my assets, and how will I receive my statements?
Frequently asked questions about choosing a portfolio manager
What is the difference between an advisor and a portfolio manager?
Check the mandate you are giving the professional and the activities their registration permits. Under a discretionary portfolio management mandate, the manager makes investment decisions within the limits agreed with you, without seeking approval for every transaction. Always ask who will decide what to buy and sell and how the mandate will be governed.
How can I verify that a manager is authorized to practise in Quebec?
Consult the Autorité des marchés financiers register. Look up both the firm and the professional, then check whether their registration covers the proposed service. A professional designation or an online presence does not replace this check.
Which fees should I compare before choosing a firm?
Compare the total cost, rather than management fees alone. Ask which fund expenses, trading costs, currency conversion fees and administrative charges could apply, and request an annual estimate in dollars. Also clarify whether the returns shown are before or after fees.
What should I prepare for an initial meeting?
Prepare your goals, investment horizon, liquidity needs and questions about fees, risks and ongoing service. An overview of your accounts can help clarify the services you need. Ask the team how to share your documents securely.
Discover portfolio management at Pratte
From our offices in Montreal and Gatineau, we serve private and institutional clients. Our approach combines quantitative analysis, technology and our team’s expertise to inform investment decisions.
Would you like to review your investments or discuss a new project? Explore our portfolio management services and request a call with our team. This initial conversation will help us discuss your situation and determine whether our services meet your needs.
