Section 8 – Financial Planning and Portfolio Monitoring

Investments and Portfolio Monitoring

As a saver-investor, it is essential that you be aware of your short-, mid- and long-term objectives. You should also assess whether you have the ability, interest and rationality required to manage your portfolio yourself, or it would be preferable to hire a specialist to do so.

Monitoring should be performed both in terms of investments (by security) and the portfolio as a whole (general direction). By comparing your results with those of other similar products available on the market, you can identify variances. Whether you opt for self-management or entrust the management of your investments to a third party, it is important to stay true to yourself in terms of your objectives and the progress of your financial life.

Portfolio Monitoring

When you entrust your portfolio management to a third party, you should be able to appropriately monitor this person’s work. Portfolio monitoring involves analyzing several factors.

Management Style

By taking the time to understand the various portfolio management styles offered on the market, you will be able to select a style that is adapted to your objectives and needs.

Compliance

The terms and conditions of the contract with the portfolio manager are usually confirmed in writing and identify the investment policy and management framework. Compliance of the portfolio manager’s work can mainly be assessed in terms of compliance with the following aspects:

  • The assignment terms and conditions. For example, the contract could stipulate that the entire bond portion must have an overall rating of A or higher, that no security may make up more than 10% of the portfolio, that no single industry may make up more than 30%, etc.;
  • The investment policy, which stipulates the desired distribution between income and growth as well as the minimum and maximum to be allocated to each asset category;
  • The management style for which the portfolio manager was selected.

Performance

When evaluating a manager, take into account the performance history and the level of risk assumed. To evaluate the performance of your portfolio, find out what your return was last year, by account and on a consolidated basis, and then compare, based on your portfolio’s asset allocation, if your results are better, the same or lower than the reference indices.

Service Quality

To assess the quality of the service you are receiving from your portfolio manager, you should meet with this person at least twice a year and document in writing the issues discussed during these meetings so that you can monitor the outcome of decisions made. The portfolio manager should also submit a complete and detailed management report on a regular basis.

Administration

You should assess the amount of the various fees paid, including: management, custodial or brokerage fees, as well as any interest charges, if applicable. You can then determine if the service you are receiving is appropriate and reasonably priced, according to your capital invested. There are significant variances between the management fees for various products and services offered on the market (private management, mutual funds, baskets, etc.).

Taxation

Portfolio monitoring also involves taking various tax aspects into consideration such as the deductibility of the various fees incurred as well as the management of gains and losses at the end of the year. In addition, after-tax rates of returns on various types of investments must also be considered (see Section 7).

Section 8 – Financial Planning and Portfolio Monitoring
Investments and Portfolio Monitoring
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