Fortunate Resident with Gift from Grandparents but no Time/Interest to Invest
Kabir comes from a family that has done well and highly values education so is one of the less than 10% who was able to complete undergraduate and medical school with zero debt. In addition, his doting grandparents gave him 120K to invest with the sole recommendation that he “speak with a banker”. Although relatively well off, Kabir has no personal experience with financial management so simply put the funds in the bank and asked an advisor in the branch to open a TFSA and “do something with the money”. The advisor told him that the maximum he was eligible to put in a TFSA was 90K and suggested that he start an RSP with the remaining funds.
Kabir agreed and directed his advisor to buy a fund he thought was good with half the money in the TFSA and leave the rest in cash and then open an RSP and leave that 30K entirely in cash until he had time to think things over. About a year later, Kabir contacted me for advice about next steps.
Despite his very fortunate circumstances, this young man and his family live very modest lives. He would like to become much more knowledgeable about investing, but at present wishes to concentrate fully on his residency. He asked for help mostly to honour the gift from his grandparents by using it wisely.
We discussed options and much to my surprise, he elected to keep the 45K in the mutual fund his banker had selected and used another 30K in the TFSA to purchase equal dollar amounts of three CND businesses that he admired with the final 15K left in cash. In his RSP, he decided to buy a US index fund with 20K and left 10K in cash. He explained that he was going to transmit these instructions to his bank and then re-evaluate in 12 months. At that time, he would see how the various choices performed and make adjustments.
This struck me as an unusually bold decision given his lack of experience, but it made sense to him. He felt that it was simple, yet would give him a “feel” for the market and help him decide if he would gradually take more control or, on the other hand, perhaps conclude that this was not a major interest for him and leave it all to professional advisors.
KEY CONCEPTS:
Any financial plan can be like choosing clothing in that only the individual with the funds knows themselves well enough to decide what makes a comfortable fit.
A full-service financial manager works well for many people, but an interested client can still make specific requests if those make sense to them.
Once you do have a plan, there is no need to rush your purchases. Taking time to get a sense of how things work can build confidence to make informed decisions.