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Investorline is the Bank of Montreal's on-line trading platform.  Having your accounts on this platform gives you access to BMO's research - the same research that it's advisors use in order to make portfolio decisions and advise clients - of course mixed with their own experience of the markets (which is really what you buy when you hire an advisor).

Recently, (which means I don't know exactly when) BMO launched an additional service on it's Investorline platform: Advice Direct, which is a fee based service enabling on-line investors to talk to a human being presumably qualified to offer advice.  An excellent marketing strategy, and very forward thinking of the Bank, but will it do the job?

I don't think this will do the job of filling the gap that investors are looking for but it comes close enough.  Of course, my analysis is based on what I think this gap is.

I beleive that do-it-yourself investors who open on-line trading accounts because they believe they can do as good a job as an advisor for far less in terms of cost are really quite well informed themselves and have taken the time to read up on investing in general and their own investment positions in particular.  I believe that these individuals need to speak with someone from time to time just to bounce some ideas around, and feel more confident about what they are doing.  I also believe that very much like a doctor, once you find an advisor who understands your motivations and way of thinking you want to stick with that person and begin to trust their advice.  This is the whole argument for fees based advice.  It also gives you the flexiblity of getting different types of advice from different types of advisors.  Yes folks, not all advisors are the same.  Some of them like to focus on planning and picking investments is not their strong point, others are brokers, and couldn't come up with a financial plan if their lives depended on it.  Personally, I would like to have a bit of advice from both rather than be locked in positon with just one.  Soem advisors create teams in order to offer a fuler spectrum of advice, but that only happens when they have grown big enough to afford the additional expense of running a team.

BMO is positioning their service for investors with at least $100,000 in investments at an annual fee rate of 1% that goes down as the size of the investments goes up.  I don't think that is what the on-line investor is looking for.  What they are looking for is someone they can buy an hour of time or two hours at a fixed rate of let's say $150 plus tax, just like any other professional such as an accountant or a lawyer.  Then the measure of how good the advisor is would be the hourly rate they charge.  I would have a fair idea of the value I am getting for the money I am paying. Let's face it, if you're 65 and have $500,000 in investments, do you really want advice from a 25 year old fresh out of college, with a computer program that helps them give you standard advice? Advice Direct is not for me, I don't want a punck who knows nothing about me, ask me a few questions and start giving me advice about what I should do with my investments!

My last question is: what about the big guns at Nesbitt Burns who charge a minimum of 1.5% on fee based accounts - how is this going to change their business?



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