There is an ever increasing number of firms and institutions that are offering investment platforms. But with so much competition springing up, who should you invest with?
What Are Your Financial Goals?
The first place to start is to look at your financial goals. What types of investments are you looking to hold? Are you planning to manage all your investments yourself? Or is a financial advisor, or a robo-advisor more your speed?
What types of assets do you want to be invested in? ETFs? Single stocks? Crypto? Real estate?
Many of the main brokerages that you’ll find, such as those offered by the big banks, have a select listing of available investments. Often if a newer asset class, such as cryptocurrency, is in your plan then a single brokerage often isn’t enough.
The other element to consider here is the availability of the types of funds you want. Many of the larger, traditional financial institutions carry an increased product offering that you can’t access anywhere else. This is often the case with mutual fund companies, especially with corporate programs if you are so fortunate. The fund selections that you can make through those programs often aren’t even available to the non-institutional investor.
Once you narrow down what your ideal investments involve, you will be better able to narrow down the list to those platforms that provide all the benefits you need.
Pay to Play
Of course, narrowing down the list of who can provide you the services you want to use is only the first step. Each of those platforms carries their own set of fees. And those fees aren’t always balanced among the different investments. For example, many firms have somewhat reasonable commissions on stock trading, but the costs to take on more complex financial instruments like options becomes exponentially more expensive.
Look at your financial plan, what are the costs to perform your desired style of trading? What do those costs mean to your total returns?
The other side of costs is the benefits that you receive for those fees. What are you actually receiving in exchange for your hard earned dollars? The internet has brought about some magnificent changes, but an automated chatbot certainly doesn’t inspire confidence, especially when dealing with a problem with your financial accounts. The availability to speak with someone who can actually help resolve your problems isn’t something so easily overlooked.
House of Cards
Going hand in hand with paying to play is the complexity of your financial system. While it is certainly possible to minimize your fees by having investments at a variety of institutions, that also makes it harder for you to keep on top of your balance sheet. There is some merit to having a central dashboard that you can check periodically to know that you are on track financially.
With all the various logins, coupled with multi factor authentication, it can already seem harder to access our own accounts than it would be breaking into Fort Knox. We all have busy lives, which means if we can make just one piece a little bit easier, that is truly valuable.
Unfortunately, as your financial situation evolves, things will continue to change. A new job might mean a new pension/RRSP provider. Or your evolving relationship might see you looking into different financial instruments (like a mortgage or car loan), or even consolidating accounts with your partner.
You won’t ever be able to wrest control over everything from the twists of fate. Start with what you can control, your financial goals and plan, and build the best system that you can with what you have now. And periodically check back in to make sure your system is still right for you as you grow through life.