10 November, 2017 Retirement

The Benefits of Consolidating Your RRSPs

Why combining your RRSPs improves diversification and customization

Diversifying your investment allocation is a tenet of successful investing. Diversifying your accounts, however, may limit your investment potential.

Many Canadians have multiple financial advisors, so it is safe to say that they may also have two or more Registered Retirement Savings Plans (RRSPs). And, while not putting all your eggs in one basket is a smart motto to live by, there may be much greater value in consolidating all your RRSP accounts with one advisor.

An Advisor who knows your true financial position can ensure that your portfolio is effectively diversified and create a plan that realistically helps you achieve your goals.

Diversify effectively

When it comes to diversification, you may be exposed to two issues if you have multiple RRSP accounts: under diversification and over diversification.

Consolidating your RRSPs will help identify gaps in your asset allocation and make sure you’re not under diversified. In other words, when your investments are scattered over a handful of accounts it is more likely that you may lack adequate exposure to important asset classes, especially global and alternative investments.

Furthermore, bringing your RRSPs to one Advisor will help you identify overlapping holdings and make sure you’re not over diversified. For example, if you have multiple RRSP accounts, you may very well have two or more Canadian equity mutual funds. If these mutual funds invest in a similar area of the market, for instance, in large companies, you may have more exposure than you think, at the cost of more effective diversification.

Spend less time talking about your investments

The more accounts you have with multiple Advisors, the more time you must spend meeting and discussing your investments. It takes time, but differing opinions can lead to additional stress. You can eliminate those headaches by consolidating your RRSPs.

Create a truly customized plan

If your Advisor knows your complete financial picture, they can create a truly personalized plan that truly accounts for your objectives and risk tolerance. Conversely, if an Advisor does not know your situation, your plan may not meet your needs. By combining your RRSPs, you create a more streamlined picture of your investments and can better help your Advisor do their job.

Call our office today to discuss how you can benefit from consolidating your RRSPs.