INVESTING GUIDE

Investing is rarely one-size-fits-all. For many Canadians with growing wealth or mid-to-high six-figure portfolios, the question is no longer if they should invest, but how to do it in a way that balances convenience, professional guidance, and cost-efficiency. Managed portfolios, sometimes called professionally managed portfolios or managed investment portfolios, offer a solution for those who want investment expertise without handling the day-to-day decisions themselves.

In this guide, we’ll walk you through how managed portfolios work in Canada, the costs involved, their advantages and disadvantages, and key factors to consider when deciding whether a managed account is right for your financial goals. We’ll also compare them to traditional mutual funds, DIY exchange traded fund (ETF) strategies, and other portfolio management services.

What Is a Managed Portfolio?

A managed portfolio is a professionally overseen collection of investments where experts make day-to-day decisions on your behalf. Rather than buying and selling individual stocks, bonds, or ETFs yourself, a team of portfolio managers handles your investments according to your financial goals, risk profile, and investment objectives.

Key Features of Managed Portfolios

• Professional oversight: Portfolio managers actively monitor and adjust holdings based on market conditions and your personal objectives.
• Discretionary or advisory control: Managers can make investment decisions on your behalf, either fully (discretionary) or with your approval (advisory).
• Customized asset allocation: Diversified portfolios across equity securities, fixed income securities, and sometimes alternative investments.

How Actively Managed Portfolios and Robo-Advisors Differ from Other Investment Options

• Mutual funds and pooled funds: Your money is combined with other investors’ assets in a single fund, whereas managed portfolios are tailored to your individual profile.
• DIY ETFs or self-directed investing: You remain responsible for all trades, rebalancing, and portfolio strategy decisions.

Active Management Providers

Managed portfolios in Canada are typically offered by portfolio management firms, banks’ private investment divisions, and independent advisors.

Note that providers can range from boutique, high-net-worth offerings to mass-affluent solutions, so “managed” does not automatically mean high-end.

Investment Objectives and Benefits

Portfolios are rebalanced regularly and monitored for alignment with your risk profile and financial goals.

Core advantages include fiduciary duty, professional accountability, and the confidence of knowing your investments are continuously managed.

In short, a managed portfolio is about hands-off investing with professional guidance, giving investors confidence that their assets are actively monitored, rebalanced, and aligned with their long-term plan.

How Managed Portfolios Are Built

Constructing a managed portfolio involves a structured process designed to align investments with an investor’s goals, risk profile, and financial circumstance. Here’s how it typically works:

1. Constructing the Investor Profile: Conservative Portfolio, Balanced Portfolio, or Growth Portfolio?

Portfolio managers begin by understanding the client’s profile through:

• Risk profile assessment: What is the risk profile of the client?
• Time horizon: When will the funds be needed?
• Liquidity needs: How accessible should the money be?
• Financial goals: Long-term capital growth, income generation, retirement planning, etc.
• Dependency: Are there any dependents?

This step ensures the portfolio strategy is tailored to the investor’s circumstances.

2. Review the Investment Policy Statement (IPS)

Always review the Investment Policy Statement, which is a formal document that outlines an investor’s financial objectives, risk profile, and guidelines for managing their portfolio, acting as a roadmap for both the client and their portfolio manager.

The IPS defines the strategic asset allocation (equities, fixed income, alternatives), sets risk limits and allowable instruments, and provides instructions for portfolio management and monitoring.

3. Strategic vs Tactical Asset Allocation

• Strategic allocation: Long-term target mix of asset classes.
• Tactical allocation: Short-term adjustments in response to market conditions or economic shifts.

This dual approach helps balance growth potential with risk control.

4. Implementing the Investment Strategy

Managers typically use:

• ETFs: Low-cost, diversified exposure.
• Mutual funds: Access to professionally managed pools.
• Bonds and fixed income securities: Income and stability.
• Alternative investments: Diversification and risk reduction (where allowed).

5. Rebalancing and Monitoring

Portfolios are periodically rebalanced to maintain the target allocation. Real-time monitoring and reporting via technology platforms ensure timely execution. Internal oversight includes compliance reviews, advisor-client meetings, and performance tracking.

6. Model vs Custom Portfolios

Model portfolios use standardized, professionally designed allocations built for investors with similar goals and risk levels, such as conservative, balanced, or growth profiles. They’re efficient, easy to manage, and typically come with lower minimums and lower fees, since everyone in the model follows the same structure and rebalancing rules.

Custom portfolios, on the other hand, contain additional personalization or circumstances of an individual investor. Managers can adjust asset allocation, tax strategy, currency exposure, and even accommodate preferences like ESG screens or concentrated stock positions.

The right fit depends on how much customization your situation requires.

Most banks or wealth firms assign clients based on account size, complexity, and objectives.

7. Different Provider Approaches

The goal is always to create a diversified, professionally managed portfolio that matches an investor’s objectives and adapts to market conditions. However, depending on the provider you choose, there can be different approaches to managing your portfolio.

• Large banks and financial institutions: Structured portfolios with proprietary funds.
• Independent wealth firms: Personalized discretionary management.
• Digital/hybrid platforms: Combine algorithms with professional oversight.

The True Cost: MERs vs Management Fees

When evaluating managed portfolios, understanding the full cost structure is crucial. Costs are not always obvious at first glance, and Canadian regulatory frameworks, such as the Canadian Investment Regulatory Organization (CIRO), require clear disclosure of both visible and embedded fees.

Two-Tier Fee Structure

Managed portfolios typically have two main cost components:

Management Fee

This is the fee paid directly for advisory services and discretionary portfolio management. It is usually expressed as an annual percentage of assets under management (AUM). For example, Questwealth Portfolios charge 0.25% annually, with a reduced 0.20% for balances over $100,000. Tiered structures like this reward larger portfolios with lower fees.

Management Expense Ratio (MER)

This represents the cost of the underlying funds, including ETFs or mutual funds, covering fund management, administration, and operational expenses. Standard Questwealth portfolios have MERs ranging from 0.17%-0.22%, while socially responsible investing (SRI) portfolios range from 0.21%-0.35%.

Understanding the Impact of Managed Portfolio Fees

Both fees are expressed as a percentage of assets, and because they compound over time, even small differences can have a significant impact on long term growth and returns. For example, a $100,000 portfolio with a total annual fee of 0.50% could cost roughly $500 in the first year, while a $1,000,000 portfolio at the same rate would incur $5,000. Lower MERs and management fees generally improve net returns, but cost alone should not outweigh portfolio fit, risk management, and service quality.

Embedded and Additional Costs

Investors should also be aware of hidden or embedded costs, such as:

• Trading spreads when buying or selling securities.
• Fund switching fees.
• Custodial fees or performance-based charges.

Examples by Portfolio Sizes

Understanding both the management fee and MER gives a more complete picture of the investment cost, allowing for informed comparisons with mutual funds, robo advisors, or self-directed strategies.

Regulated Suitability: Getting the Right Fit

A key feature of professionally managed portfolios in Canada is the regulated process of ensuring that investments align with a client’s profile, known as a suitability assessment. This process is designed to match a portfolio’s risk level, asset allocation, and investment strategy to an investor’s financial goals, time horizon, and risk profile.

At the heart of this process is the Know Your Client (KYC) requirement, where advisors collect detailed information about a client’s income, net worth, investment experience, and objectives. KYC exists to protect investors by ensuring recommendations are appropriate and tailored to their situation.

In Canada, portfolio managers are regulated by provincial securities commissions, such as the Ontario Securities Commission (OSC). These bodies enforce rules on suitability, disclosure, and professional conduct.

Portfolio managers operate under a fiduciary duty, meaning they must act in the client’s best interest.

Suitability is not a one-time check; firms are required to update assessments periodically to account for changes in financial circumstances, goals, or market conditions.

Investors can verify that their advisor or portfolio manager is properly registered using the national registrant database, ensuring that the professional handling their portfolio meets all regulatory obligations and oversight standards.

Managed Portfolios vs DIY ETFs

DIY investing with ETFs means that the investor builds, monitors, and rebalances their own portfolio without relying on a professional manager. This approach offers complete control over asset allocation, security selection, and trading timing, allowing investors to tailor a portfolio to their exact preferences.

Control and Discipline

DIY ETFs give investors full autonomy, but require time, knowledge, and discipline to maintain a long term growth strategy, avoid emotional trading, and keep allocations aligned with risk profile.

Managed portfolios outsource these tasks to professionals, providing automatic rebalancing, tactical adjustments, and portfolio oversight, which helps maintain discipline even in volatile markets.

Costs

DIY investors benefit from lower management fees, but still incur transaction costs, ETF MERs, and potential foreign exchange (FX) fees when holding U.S. or international ETFs.

Managed portfolios often use the same ETFs, but add a management fee to cover professional oversight, convenience, and features like tax-loss harvesting.

Trade-Offs

DIY is best suited for investors who enjoy managing their investments, have sufficient knowledge, and can commit time consistently.

Managed portfolios are ideal for those who prefer to delegate the daily monitoring and tactical decisions while still accessing diversified, professionally structured portfolios.

In summary, DIY investors can outperform professionally managed portfolios, but only if they maintain a disciplined, long-term approach over decades. Managed portfolios, meanwhile, offer convenience and professional guidance, helping investors stick to a well-defined investment strategy without the day-to-day workload.

When Active Management Makes Sense

Choosing a managed portfolio isn’t one-size-fits-all; it depends on your financial situation, goals, and personal preferences. Typically, these are the circumstances under which a managed portfolio makes sense for Canadian investors:

• If you value personalized advice and professional oversight: Managed portfolios offer tailored asset allocation, tactical adjustments, and discretionary management to keep your investments aligned with your objectives.
• If your time is limited or financial knowledge is moderate: Delegating day-to-day decisions can reduce stress and free up time, ensuring rebalancing, dividend reinvestment, and tax-loss harvesting are handled automatically.
• If your portfolio exceeds $250,000-$500,000: Professional management often becomes more cost-effective, especially when factoring in potential gains from disciplined rebalancing and access to institutional pricing or features not easily available to smaller DIY investors.
• If you struggle with behavioural investing: Investors prone to emotional reactions during market volatility may benefit from a professional buffer that enforces discipline and long-term strategy.
• If you prefer autonomy and enjoy learning: DIY ETF strategies may be more rewarding, as long as you can maintain consistency, monitor risk, and manage transactions effectively over decades.
• If your investment horizon is long-term: Both DIY and managed approaches can work, but managed portfolios offer a structured approach to tactical and strategic asset allocation that can help navigate market fluctuations while staying aligned with your goals.

Ultimately, the right choice is situational, not universal. A smaller, self-directed investor may thrive with DIY ETFs, while a mid- to high-net-worth individual seeking discipline, convenience, and professional insight may find that a managed portfolio best supports their financial objectives.

Evaluating Providers: A Checklist

Before entrusting your wealth to a managed portfolio provider, it’s essential to conduct thorough due diligence. Here’s a structured approach:

1. Verify Registration and Oversight

Confirm the firm and individual advisors are either registered with CIRO or your provincial securities regulator. This ensures they operate under legal and compliance standards.

2. Understand Fees and All-In Costs

Ask for a full breakdown of management fees, underlying fund MERs, trading costs, and currency conversion fees. Clarify if there are any trailing commissions or performance fees. Compare total costs against other providers and DIY options.

3. Review Investment Philosophy and Performance Methodology

Ensure the firm’s asset allocation strategy, rebalancing process, and tactical decision framework aligns with your goals. Confirm how past performance is calculated and whether results are audited or independently verified.

4. Confirm Asset Custody

Determine whether client assets are segregated accounts or pooled funds. Segregated accounts offer more transparency and protection in the unlikely event of firm insolvency.

5. Check Credentials and Professional Standards

Look for advisors with CFA, CIM, CFP, or equivalent designations.

Following this checklist helps investors compare providers confidently, understand true costs, and ensure their portfolio is managed with professional rigour and regulatory compliance.

Risks & What to Watch (Hidden Costs, Conflicts, Tax Drag)

While managed portfolios provide convenience and professional oversight, investors should remain aware of potential risks and hidden costs.

• Performance Dispersion: Even if a model portfolio shows strong returns, actual client portfolios may differ due to the timing of deposits, withdrawals, or trade execution delays. Past performance is not indicative of future results.
• Tax Inefficiency: Rebalancing within taxable accounts can trigger capital gains, increasing the tax drag on net returns. Investors in non-registered accounts should ask how the manager handles tax-loss harvesting and dividend reinvestment.
• Opaque Reporting: Beware of statements that cherry-pick benchmarks, obscure MERs, or combine management fees with underlying fund costs. Investors have the right to request detailed cost breakdowns and independent performance verification.
• Liquidity and Access Limits: Certain portfolios or alternative investments may impose redemption restrictions or withdrawal penalties. Confirm terms before committing, especially if you anticipate needing access to funds quickly.

Understanding all-in costs, tax implications, and reporting clarity helps investors weigh the trade-offs of professional management. A well-informed client can enjoy the benefits of portfolio discipline and strategic allocation while mitigating hidden risks.

Open an Actively Managed Portfolio Today

Managed portfolios offer a structured, professionally guided approach to investing. They provide discipline, personalized asset allocation, automatic rebalancing, and strategic oversight, which can be especially valuable for investors seeking long term growth or looking to provide consistent income without dedicating significant time to market monitoring. On the flip side, they come with management fees, underlying fund costs, potential tax drag, and the risk of conflicts of interest. Understanding all-in costs and transparency of reporting is essential to avoid surprises.

The decision ultimately hinges on your financial goals, risk tolerance, time availability, and comfort with DIY investing. If you value professional guidance, behavioural discipline, and access to tailored strategies, a managed portfolio may be a fit. If you enjoy hands-on control, cost minimization, and have the knowledge and patience to stay disciplined, DIY ETFs or a robo advisor could suffice.

Next Steps:

• Consider your investor profile (e.g., time, risk tolerance, and financial objectives—are you looking for a conservative portfolio, a balanced portfolio, etc.?).
• Compare providers using the checklist above.
• Request sample statements, cost breakdowns, and performance reports from each potential provider.
• Open a Questwealth Portfolio account today.

Being informed and deliberate ensures that your portfolio aligns with both your financial goals and lifestyle priorities, while avoiding hidden risks and surprises.