Wealth Professional 2.6

THE FIRST-ANNUAL ADVISOR LIFESTYLE SURVEY Find out what your peers in the industry are making, saving, doing and wearing

THOMAS CALDWELL A LIVING LEGEND TALKS ABOUT HIS CLIMB TO THE TOP THE UNITED STATES OF GROWTH IA CLARINGTON FUND MANAGER ON THE U.S. RECOVERY WWW.WEALTHPROFESSIONAL.CA ISSUE 2.6 | $6.95

G N I D N A T S T U O S E C I F F O T N E D N E P E IND wn

their o g n i t a e r c s advisor r u e n e r p e r t industry e The en h t n i e c a sp

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Reward your high net worth clients

INTRODUCING IA Clarington’s Elite Program

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Not available on IA Clarington Money Market Fund, IA Clarington Short-Term Income Class, IA Clarington Bond Fund Series F, IA Clarington Target Click Funds and Series V of the IA Clarington Inhance Monthly Income SRI Fund, IA Clarington Inhance Canadian Equity SRI Class, IA Clarington Inhance Global Equity SRI Class and IA Clarington Inhance Growth SRI Portfolio. Rebates begin at $500K for IA Clarington Strategic Income Fund Series F. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. The IA Clarington Funds and IA Clarington Target Click Funds are managed by IA Clarington Investments Inc. IA Clarington and the IA Clarington logo are trademarks of Industrial Alliance Insurance and Financial Services Inc. and are used under license.

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CONTENTS

4 | Upfront The stories that defined the industry this month, from unconstrained bond funds to CRM2 8 | News analysis Are advisors loading clients up with trailer fees in front of CRM2?

10 | Q&A A financial advisor takes six weeks off work to drive across America and film a documentary on the coming retirement crisis

14 | Finding a niche Gavin Asset Management, an up-and-coming independent office, is scoring big with a focused practice that leverages its expertise in one unique area – managing the financial lives of professional hockey players 40 | Fund manager profile Catching up with the emerging U.S. growth story with IA Clarington fund manager Ban Bastasic 42 | Sizing up the average Canadian advisor What do the lifestyle and finances of the average Canadian financial advisor look like?

The results of our first annual survey might surprise you 54 | Industry icon The newest member of IIAC’s Hall of Fame, Thomas Caldwell, has been doing it his way for a long time. The young ones could learn a thing or three

60 | Driving change When is the right time to bring employees onboard with strategic initiatives?

62 | Making movies 10 mistakes to avoid when creating videos to promote your business 64 | Ten questions With Kerr Financial’s Krista Kerr

54

20 OUTSTANDING COVER STORY

issue

2.6

Outstanding Independent Offices Find out which of the independent offices in this country are absolutely killing it

INDEPENDENT OFFICES

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EDITORIAL

INDEPENDENTS REPRESENT THE BEST OF THE INDUSTRY

COPY & FEATURES EDITOR Vernon Clement Jones SENIOR WRITER Jeff Sanford WRITER Nicola Middlemiss COPY EDITOR Clare Alexander CONTRIBUTORS Sheldon Gordon, Sean Van Zyl

ART & PRODUCTION ART DIRECTOR Daniel Williams GRAPHIC DESIGNERS Joenel Salvador, Marla Morelos

SALES & MARKETING NATIONAL ACCOUNTS MANAGER Dane Taylor ASSOCIATE PUBLISHER Trevor Biggs GENERAL MANAGER SALES John MacKenzie MARKETING AND COMMUNICATIONS Claudine Ting PROJECT COORDINATOR Jessica Duce

CORPORATE PRESIDENT & CEO Tim Duce OFFICE/TRAFFIC MANAGER Marni Parker TRAFFIC Kay Valdez EVENTS AND CONFERENCE MANAGER Chris Davis

Editorial enquiries vernon.jones@kmimedia.ca Advertising enquiries dane.taylor@kmimedia.ca Subscriptions tel: 416 644 8740 • fax: 416 203 8940 subscriptions@kmimedia.ca KMI Publishing 312 Adelaide Street West, Suite 800 Toronto, Ontario M5V 1R2

Did the wealth management industry in Canada evolve to a whole new level of importance and influence this past September?

When CIBC finally got around to choosing a new CEO, it was not, as many expected, the head of the retail side of the bank, a division responsible for 70% of the firm’s revenue. Nor did the bank break 100 years of tradition and choose someone from outside. No, the choice was Victor Dodig, the head of wealth management at CIBC. This is a significant development in the Canadian financial services. For the first time in the history of this country, the CEO of a major Canadian bank is someone from the wealth management side of the business. Not retail banking, not investment banking – wealth management.

Since his ascension to CEO, Dodig has been talking about the new strategic direction at the bank. Wealth management is going to be a key part of this. The bank, with two ‘foundational’ investments in American financial planning firms, has $2 billion ready to go to increase the bank’s footprint in this key sector. Did the Canadian wealth management industry just come of age and gain a new round of respect? Arguably – we’ll have more on that story coming next month.

For this issue, we’re looking in another direction, highlighting some of the outstanding independent advisor firms in this country. These are the firms that have developed a practice that is not dominated by one of the big banks. They’ve carved out a space a little farther from the head office. The shelf is an open one.

We’ll say it out loud, right here – these are the offices that have made a successful business not by offering proprietary product, but by taking on the responsibility to deal seriously with the client sitting across the table.

Jeff Sanford Senior Writer

Wealth Professional is part of a international family of B2B publications and websites for the finance industry Offices in Toronto, Sydney, Auckland, Manila, Denver wealthprofessional.ca Copyright is reserved throughout. No part of this publication can be reproduced in whole or in part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as WP magazine can accept no responsibility for loss.

CONNECT

Contact the editorial team:

vernon.jones@kmimedia.ca

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SLF0

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sunlife.ca/happiness *2014 Sun Life Canadian Unretirement Index.

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Life’s brighter under the sun

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UPFRONT

Upfront

BEYOND THE BENCHMARK

An era of radically low interest rates is driving a boom in so-called unconstrained bond funds In late October, 50 advisors catering to high-net worth individuals gathered in the tony conference room of the King Edward Hotel on King Street in Toronto. Summoned by NEI Investments, the advisors gathered to listen to a pitch on the trendiest of investment products, so-called ‘unconstrained’ bond funds.

These new bond funds are all the rage.

Goldman Sachs and BlackRock Inc. recently reported that the assets held in their new unconstrained bond funds doubled in size over the past 12 months. Mighty global fixed income investor PIMCO re-

cently launched a similar product; other funds are coming to market. At the King Edward, Daniel Solomon, chief investment officer for NEI, explained the concept behind the funds to the well-heeled crowd.

As any advisor knows, after a solid three decades of general declines, interest rates are at rock-bottom levels. “Interest rates have been declining for thirty years; in Canada, since the early 1980s,” Solomon says. “But now they are as low as they can go. There is nowhere else to go. Fixed income returns are done in Canada. After inflation and taxes, clients are losing money

on fixed income.” Nevertheless, advisors still need to generate income for clients.

And so, “we can’t get away from fixed income,” says Solomon.

Today, with retirees living longer than ever, how to generate the income needed in a world of radically low rates? Enter the unconstrained bond fund.

Typically, the traditional approach among institutional investors has been to manage a bond fund so the performance of that fund matches some kind of industry benchmark. Keeping up with the benchmark was all a fund manager had to do to keep his job.

But in today’s world, simply keeping up with benchmark is not good enough. “The old pension plan strategy on fixed income was to stay close to the benchmark,” Solomon says. “But that’s not going to work

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UPFRONT

THE BENEFITS OF LEAVING THE BENCHMARK BEHIND Believe it or not, there are opportunities for higher returns in fixed-income markets – if investors are willing to go global. Shifting the focus of a fund away from the domestic Canadian market will provide some juice. According to NEI, the average return globally on fixed income is 7.16%, compared to just 5.52% domestically (both returns achieved at a risk-adjusted rate of 3.46%).

Year

Amundi fund returns

Barclays Global Index

2008 2009 2010 2011 2012 2013 2014 YTD

7.79% 31.67% 10.78% -4.92% 21.34% 5.18% 4.76% 10.53%

5.58% 5.09% 4.61% 5.40% 5.72% -0.14% 5.27% 4.70%

now. If you follow the benchmark, you’ll have 17% of your money in Japan. With the yield on a 10-year JGB at 0.46%, fixed income streams are going to be extremely low.”

In other words, matching the benchmark is no way to manage a fixed-income fund. Now that rates are as low as they can go, fixed-income managers need to break away from the benchmark and go out in search of pure, real return.

Fixed-income managers are acting more like equity fund managers do in this weird new environment. “People have to look at what they did for equities,” says Solomon.

“They don’t try to match the benchmark,

but to beat it. We have to apply that to fixed income. Pension funds follow benchmarks.

But investors want real returns. And that’s what this is about. This is real, active management.”

In the case of the new NEI fund, the strategy will be to manage five different aspects of bonds – country selection, sovereign versus corporate bond allocation, credit quality allocation, yield curve and duration, as well as currency. By managing all of the various aspects that affect bond fund return – by going beyond simply matching the benchmark – the hope is that these unconstrained bond funds will generate higher real return.

“The old pension plan strategy on fixed income was to stay close to the benchmark. But that’s not going to work now. People have to look at what they did for equities. They don’t try to match the benchmark, but to beat it. We have to apply that to fixed income” Daniel Solomon, chief investment officer, NEI Investments

In the case of NEI, finding a manager that could manage each of these return-producing factors was a challenge.

NEI manufactures fund-of-funds. Finding managers involves a rigorous selection process. Solomon searches through the universe of managers and pares down that list to find the managers they work with.

“We were looking for someone who could do all these things. But this was hard,” he says. “We found many who could do some, but only six or seven who managed on all five points. Many wouldn’t do currency, which has to be a part of this.”

Eventually, NEI found Amundi, a European fixed-income manager wellknown on the other side of the pond, where the company oversees $1 trillion in assets. After Solomon’s introductory speech, French fixed-income manager Pascal Dubreil took to the podium to explain how his fund accomplishes such a complex mandate.

Managed from London, the Amundi fund is designed to work in close contact.

Everyone on the team is on one floor, in the same room. This is important to the operation of the fund, says Dubreil. “The managers work on the same floor, in the same office. I don’t have to book an appointment to talk to any of them. If I want a view on emerging markets, I turn my chair around and ask that manager.”

To the credit of Dubreil, the fund stayed steady through the recent ‘taper tantrum,’ when bond markets fluctuated wildly in response to a suggestion by the FOMC that it might end its quantitative easing program. The fund also has generated return without piling into high yield corporate debt, or without piling in high yield corporate junk bonds. (The funds sports an average debt rating of A-.)

The duration of the fund is shorter (less risky) than the benchmarks it has beaten.

In six of the last eight years, it has substantially beat the benchmark. “There are no big bets on one aspect. The returns come from many different categories,” says Dubreil. In other words, the way to generate real return in an era of radically low interest rates is to be unconstrained.

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HEARD ON THE STREET

A couple of interesting CRM2 questions are floating around The next round of the new so-called CRM2 regulations is set to come into place in the early summer of 2015. But the debate is already here. While the improvements in transparency around fees will make the industry stronger in the long run, some executives continue to question the details around implementation.

One industry player, in a recent private conversation, pointed out that when similar regulations were brought into play in the UK, advisors who sell funds through the insurance channel were also covered by these regulations. This executive went

on to mention that this is not the case in the Canadian version of these regulations.

This exec wondered if Canada is about to botch the implementation of CRM2. Or, as he put it, “because the insurance channel is not being included in these regulations, unlike the UK, any mutual fund dealer who doesn’t like the new transparency rules can simply shift their business over to the insurance side, can skip on CRM2, and continue to charge fees as they always have.”

Here’s another worry about the coming shifts. A different exec wondered why it

is that the practice of vigorously promoting proprietary product through captive sales channels has not been addressed in CRM2. “Since the Great Recession, new regulations in the States have made it very tough to do this. Every time I talk to one of my friends at Merrill Lynch down there, they tell me they are scared to sell house brands. The fear is that they’ll trip up over regulations. I know the United States is often ahead of Canada on regulation. But why aren’t the big banks being forced to point out to clients the incentives to sell proprietary product?”

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See the broad range of solutions at tdadvisor.com Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus, which contains detailed investment information, before investing. Mutual funds are not guaranteed or insured, their values change frequently and past performance may not be repeated. TD Mutual Funds are managed by TD Asset Management Inc. a wholly-owned subsidiary of The Toronto-Dominion Bank and are available through authorized dealers. ® The TD logo and other trade-marks are the property of The Toronto-Dominion Bank.

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Job Description:

Mechanical Specifications:

Contact:

Client: TD Docket #: 112-LTDCICM4544

Bleed: None Trim: 7” x 4.625”

Acct. Mgr: Christian / Genevieve

Producer: Barry D

Crea. Dir: Dave F

Studio: Kim C

Colours: 4C Start Date: 8-12-2014 4:58 PM

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NEWS /ANALYSIS

Is CRM2 already influencing mutual fund sales?

Some wonder whether sales of mutual funds with trailer fees attached are rising before the arrival of new regulations around transparency Roy Vokes is a financial advisor with both a fee-based and a commission-based practice, Agora Financial Services in Nobleton, Ont. He’s attempting to shift his book of business toward a higher net worth clientele and migrate his commission-based clients to a fee-based arrangement.

Vokes is one of many advisors who may be adapting their compensation model in light of CRM2 – Client Relationship Model, Phase 2 – the new disclosure rules mandated by the Canadian Securities Administrators [CSA], coming into force in stages by July 2016.

One move Vokes never considered making is to cajole his commission-based clients into a last-gasp buying binge of DSC products in order to lock in five or seven years of trailer commissions before those clients fully twig to how costly those products are.

Although he’s not employing this short-term and self-serving strategy, some in the industry are rumoured to be doing so. “I haven’t heard of any advisors taking a last kick at the can,” says Vokes.

“Some of the wholesalers have mentioned this, but they’re not telling advisors to go out and DSC everybody.”

Joanne De Laurentiis, president and CEO of the Investment Funds Institute of Canada, says CRM2 “will really help advisors to have a much more robust conversation with investors. What I’m hearing from advisors is that they welcome the change.” She says IFIC’s data does not support the notion of advisors massively locking clients into DSC products before the transparency regime bites.

But John De Goey, vice president at Burgeonvest Bick Securities Limited and a fee-only advisor for the past 15 years, has heard those rumours and finds them plausible. “When they start disclosing

commissions,” he says, “the only commissions those advisors will be receiving for the seven years after they’ve put a client into a DSC fund are the trailing commissions, not upfront commissions.”

Aaron Keogh, a commission-based advisor at Greendoor Financial Inc. in Windsor, Ont., says, “I’m sure some advisors would be potentially doing that.” If so, he warns, when the scales completely fall from clients’ eyes, there could be litigation down the road.

Vokes feels he’s been upfront with his commissionbased clients all along, but “they’re still going to be shocked when they see the numbers. In percentage terms, it never sounds like a lot, but in dollar terms, that’s where the shocker is going to come.”

A final DSC frenzy is only the latest speculative scenario surrounding financial advisors. Alternative forecasts have raised the possibilities of advisors leaving the industry in significant numbers or moving up the client food chain by switching to a fee-based compensation model.

“Some of them have already moved to the percentage of assets versus the embedded compensation arrangement,” says Greg Pollock, president and CEO of Advocis. But he doesn’t sense that many more advisors will go this route.

Vokes is one who will. “I’ve got several clients whom I’m talking to right now about going to a feebased practice,” he says. “Anyone over $1 million I’m looking at immediately, but from $500,000 up, I’m going to be looking at in the next six months. By the time we get to full disclosure in 2016, I will have talked to everybody about it.”

Keogh predicts a degree of migration from traditional A-class funds, with embedded commissions, to F-class funds, which are fee-based.

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“That’s what we have been doing in our firm,” he says. “It enables clients to have lower MERs [due to the elimination of trailers], and adds a bit of extra value to the portfolio.” (See the sidebar at right for more.)

Many clients don’t have enough assets to make fee-based compensation a realistic alternative for their advisors, says Keogh. “That would eliminate the possibility for a large proportion of the population to get financial advice, because they won’t be able to afford it.”

DeGoey expects about five or six per cent of advisors will exit the industry in Canada as a result.

“They won’t be forced out directly due to financial pressures, [but rather] as a result of the moral impact of having to look their clients in the eye and tell them that they’ve been earning commissions all these years when they’ve been trying to B.S. them by making it sound as though they’re just working out of the goodness of their hearts.”

HITTING THE RESET BUTTON Some mutual fund companies are rejigging their fee structures to take into account potential investor reaction to CRM2 disclosure.

Manulife Investments, a division of Manulife Asset Management Limited, announced that, effective September 15, it has lowered MERs for some of its funds. The MERs of Series F and FT funds were trimmed by as much as 15 to 40 basis points in order to “provide attractive pricing options for investors.”

National Bank Investments Inc. [NBI], as of September 23, started paying most operating expenses for its mutual funds in return for receiving a fixed-rate administration fee. This means the main components of the MERs are now fixed, rather than variable from year to year as they were previously.

That, in turn, means greater predictability for investors about the costs of investing.

The rest of the large fund manufacturers in Canada have also introduced this new so-called “fixed rate administration” fee model.

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See the broad range of solutions at tdadvisor.com Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus, which contains detailed investment information, before investing. Mutual funds are not guaranteed or insured, their values change frequently and past performance may not be repeated. TD Mutual Funds are managed by TD Asset Management Inc. a wholly-owned subsidiary of The Toronto-Dominion Bank and are available through authorized dealers. ® The TD logo and other trade-marks are the property of The Toronto-Dominion Bank.

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Job Description:

Mechanical Specifications:

Contact:

Client: TD

Bleed: None

Acct. Mgr: Christian / Genevieve

Colours: 4C

Producer: Barry D

18/11/2014 4:32:01 AM

NEWSMAKER Q&A

BROKEN EGGS A film about the looming retirement crisis

An American financial advisor took six weeks off work to drive across the country and film a documentary about the looming retirement crisis. Nicola Middlemiss chats with the film’s creator, Chad Parks It’s a dream many advisors might have had – six weeks on the road, travelling across the country with your family in tow. But what about taking that oncein-a-lifetime opportunity and using it to teach people about their pensions?

It might not sound as appealing to everyone anymore, but that’s exactly what former financial advisor Chad Parks did in his quest to better inform U.S. citizens about the impending pension crisis.

“Initially, we were just going to go on the road and do some filming of our customers to use on social media, but we realized that with the resources it would take to do that, we might as well do something more. We just kind of said, ‘There’s a bigger story here; let’s do a documentary.’” And so Broken Eggs was born.

Parks is the founder and president of The Online 401(k), a web-based solution for small businesses looking to equip their employees with affordable pension plans. According to him, the site was established to help pave a smoother road to retirement, but it seems a lot of people have taken a bumpier route.

Chad Parks shared why he took his own bumpy trip across America, what he achieved and what you can learn from it.

ON ORGANIZING THE TRIP AND GETTING THE TEAM TOGETHER… “It was kind of just scrapped together. Being an entrepreneur and not knowing what I don’t know, I just threw the idea out there.

Sylvia, my director of marketing, had some great contacts – she knew a screenwriter, she’d worked with a cinematographer, and we just pulled together people from inside the company and others who I hadn’t even met. Everybody represented a specialty, and we pulled it off.

You know, you throw this idea out there, and you say, ‘Who’s crazy enough to want to go on this six-week road trip across the country? Who can do that; who can take the time?’

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Luckily, we ended up with a great group of people who were passionate about the cause, including my family. That was actually the first thing – I had to ask my wife if she would come along.”

ON FATE AND FINDING HIS PRODUCER….

“We realized that a bunch of talking heads does not make a very good film, but thankfully, fate intervened for me when I was at an Inc. 5000 conference. I was talking about the film to a guy I had met at a cocktail party, and he said his wife had been a producer at CNN and was looking for projects to get involved with.

That was delivered from the universe – that was Emily Probst Miller. She was the primary producer on the film and the writer/director. She was the one who looked at everything we had and brought her skills to the table. She said, ‘All right, I know what you’re trying to accomplish here, but we’re going to have to interview some more people, and we’re going to have to do some character

development and really go for emotional side.’ She was really helped round it out for us.”

ON WHAT HE WAS TRYING TO SAY AND WHO HE WAS HOPING TO REACH… “When we first set off, we didn’t have a story in mind that we were trying to prove or disprove. We just set out on the road trip and went with an open

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See the broad range of solutions at tdadvisor.com Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus, which contains detailed investment information, before investing. Mutual funds are not guaranteed or insured, their values change frequently and past performance may not be repeated. TD Mutual Funds are managed by TD Asset Management Inc. a wholly-owned subsidiary of The Toronto-Dominion Bank and are available through authorized dealers. ® The TD logo and other trade-marks are the property of The Toronto-Dominion Bank.

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Job Description:

Mechanical Specifications:

Contact:

Client: TD

Bleed: None

Acct. Mgr: Christian / Genevieve

Colours: 4C

Producer: Barry D

18/11/2014 4:48:24 AM

NEWSMAKER Q&A

ON HIS RECONSIDERING HIS OWN PENSION PLAN… “I was a financial planner, an investment advisor.

I run this retirement savings company, but I have to admit, it’s one of those things where the cobbler’s kids wear no shoes.

I stopped and looked at it, and I sat down and analyzed my finances, and starting with the basics, I came up with a budget again. I started tracking and setting goals about how much I wanted to save each year – an added benefit of that was not feeling guilty about spending because I know I’m saving enough.

I think that was the big light bulb moment for me, and hopefully that’s the message that we can get out to people, too.”

ON THE THREE THINGS YOU SHOULD TAKE AWAY FROM THE FILM…

mind, hoping the story would show itself. Part of that was realizing who our audience was and figuring out who we hoped to speak to.

The film does have boomers, Xers and millennials, but to be very honest, we knew it was probably too late for the boomers. I hate to be so pessimistic, but either they’ve done it or they haven’t – they can probably still make adjustments, but they’re kind of stuck with what they’ve got now.

We for sure knew that we wanted to be speaking to Gen Xers, and definitely the millennials, because if the millennials can see this, then they’d get some good pointers on what to do and what not to do.”

ON WHAT MAKES A FILM ABOUT RETIREMENT SURPRISINGLY HARD-HITTING… “The people in the film are just so real – it’s too close to home, but that’s exactly what we were trying to portray. [Viewers] can probably relate directly with one of those characters – and if not you, you know them. They’re your friends, they’re your brothers or sisters, they’re your parents, they’re your in-laws.”

“Don’t overwhelm your clients with jargon and a ‘Wizard of Oz’ approach. Get to know them, and get to know their fears and motivators. Start with the basics of a budget. Humanize yourself and connect with your clients. Asset allocation, riskadjusted return, stocks, bonds, mutual funds and investment return are all things that can come later in your conversations.

Reach out and help people know that they are not alone, and that it is ok to talk about these things; there is no shame in it. Life is complicated enough – we can’t expect everyone to be a financial expert.

Even with everything done ‘right,’ things can still turn out bad. Help your clients realize that, and also prepare a plan B, something that is realistic and doable, so that in case bad things happen, they will at least be mentally prepared for it, rather than caught off guard and afraid.”

LESSONS LEARNED Parks’ hard-hitting documentary may be filmed south of the border, but it still delivers a powerful message that feels incredibly close to home. All across Canada, people are facing up to the fact that the CPP just isn’t going to cut it in years to come, and yet very little is being done to reform the system.

As financial advisors, we’re charged with accruing our clients’ wealth, but many of us are guilty of forgetting the basics. Preparing people for retirement is the most important role we play and seems some of us might be forgetting our lines.

You can watch Broken Eggs, a frank and refreshing film, online.

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FEATURE / NICHE MARKETS

FINDING A NICHE How one independent office found its place in a league of elite advisors by managing the financial affairs of professional hockey players

It’s not surprising that the Gavin Management Group’s offices are located on Toronto’s Bay Street.

After all, it’s the financial hub of the country. But this wealth management firm is south of the bustle of bankers and other wealth professionals, tucked away on the 14th floor of the Air Canada Centre, home of the Toronto Maple Leafs.

It’s the perfect location for an organization whose focus is on meeting the unique financial needs of NHL players. Gavin Management Group’s president is Stewart Gavin, himself a former NHLer who played for Toronto, Hartford and Minnesota.

“Stew was a guy who, throughout his career, was recognized as one of those players who had his affairs in order, so he was always a point of reference for teammates,” says Matthew Bacchiochi, a portfolio manager with the group.

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FEATURE / NICHE MARKETS

“You understand the emotions…You’ve been there, you’ve walked in their shoes, and you can forewarn them of things” Stewart Gavin, president, Gavin Management Group

Combining his two passions, Gavin obtained his CFP designation and, with Bacchiochi, founded Gavin Management Group in 2003 to assist other NHL players in developing sound financial plans that allow them to enjoy their money, but also achieve financial independence.

Before opening their own niche firm, Gavin and Bacchiochi worked together at another firm that dealt exclusively with C-level executives. It was here they realized the benefits of narrowing their target clients. “We felt that, rather than compete with everybody who wants to work with that C-level executive, we defined another niche,” Bacchiochi says. “We realized we could work with professional hockey players who have a high barrier to entry, and we had a platform and a comprehensive approach that we felt wasn’t being offered.”

Gavin’s connections and understanding of the inner workings of the NHL, combined with Bacchiochi’s business education, made catering to professional hockey players a natural fit. Their plan

was to ensure their clients had a structured approach to investing, with the goal of financial independence with the lowest volatility possible.

According to Bacchiochi, carving a niche is the only way for wealth professionals to stay competitive in today’s market. “Unless you have the ability to differentiate yourself, you have a very difficult time of determining what your competitive advantages are over any other advisor,” he explains. “If you’re just focusing on rates of return, then you’re basically giving your clients an opportunity to look elsewhere when the market pulls back or there’s a macro- economic event that impacts performance.”

MORE THAN JUST RETURNS One of the biggest value propositions Gavin brings to NHL players is his intimate knowledge of the league. “It’s really important because you understand the emotions,” he says, seated at a boardroom table in his corner office, overlooking the city.

“You’ve been there, you’ve walked in their shoes,

16 | DECEMBER 2014

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FEATURE / NICHE MARKETS

and you can forewarn them of things.

“You have to bring it to their level – a 20 yearold-man whose focus is on playing hockey, taking care of themselves and their loved ones, and having a good time,” he adds. “Rather than feed them all the financial lingo that leaves their heads spinning, you break it down for them.”

“Stew is great with the hockey metaphors,” jokes Bacchiochi, saying he might describe portfolio diversification as a successful hockey team with various players that have different strengths.

But high-net-worth NHL players demand more than a good hockey metaphor from their financial advisor, and Gavin and Bacchiochi also have a strong grasp on the unique business elements of the NHL. “We have to understand the cross-border tax implications, collective bargaining agreements, how they get paid, when they get paid. This isn’t your typical biweekly salary over the course of a 365-day calendar,” Bacchiochi says. “There’s such an emphasis on cash flow in our business.

“We have met advisors who are trying to work with pro athletes, and they end up fully investing their surplus cash flow without recognition that they’re going to need that money for the offseason”

“We have met advisors who are trying to work with pro athletes, and they end up fully investing their surplus cash flow without recognition they’re going to need that money for the off-season,” he continues. “And they’re fully invested in equities because the player is young and has a long horizon, but their careers are much shorter, and their investment horizon is much closer to a 50-year-old than the average 20-year-old. So there’s a lot of things you need to be cognizant of.”

BENEFITS OF A NICHE With an intimate knowledge of a particular industry, advisors can set themselves apart and even demand a premium for their specific expertise. “You can deliver a service that is precise for that clientele and that’s going to give you an ability to have that wider moat around your business to prevent competitors from coming and prevent you from having to compete on price,” Bacchiochi says. “We go much deeper in a much narrower target market.”

Gavin adds that focusing on a niche increases efficiencies for the wealth professional as well.

“When our clients ask us for help, we know who to call. We know the people inside their organization.”

“When a player gets traded, we’re on the phone right away, talking to their department, making sure their direct deposit is set up, their personal tax information is set up,” Bacchiochi adds.

But perhaps the best benefit is getting to work with clients who share their love of hockey. “People may want to get into this space because it can be lucrative, it can be sexy, they may be fans of the sport,” admits Gavin. “But you need to know the business to get in and be accepted.”

“It’s worked well for us because of our backgrounds,” adds Bacchiochi, who played junior hockey and is a hockey fan. “You end up working with the people you want to work with, and you have the luxury of combining your business with your hobbies, so it doesn’t feel like work.”

18 | DECEMBER 2014

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To learn more about the world of fixed income opportunities visit www.franklintempleton.ca Source: Morningstar Research Inc., as of 31 October 2014. All rights reserved. The information contained herein is proprietary to Morningstar and/or its content providers; may not be copied or distributed; and is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. The Morningstar Risk-Adjusted Rating, commonly referred to as the Star Rating, relates the risk-adjusted performance of a fund to that of its category peers and is subject to change every month. The Star Rating is a measure of a fund’s annualized historical excess return (excess is measured relative to risk-free investment in Canadian Government Treasury Bills) adjusted for the fund’s historical risk. The overall Star Rating for a fund is a weighted combination of its 3-, 5-, and 10-year ratings. Overall ratings are adjusted where a fund has less than 5 or 10 years’ history. A fund scoring in the top 10.1% to 22.5% of its fund category receives 4 stars. Templeton Global Bond Fund is rated within the Morningstar Global Fixed Income category. All performance data refers to Series A units. Please refer to www.morningstar.ca for more details on the calculation of Morningstar Risk-Adjusted Ratings. For each of the 3-, 5-, and 10-year performance periods, there were in total 93, 65 and 31 funds, respectively, in the Morningstar Global Fixed Income category. Please refer to www.morningstar.ca for the 1-year information.

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COVER STORY / INDEPENDENT OFFICES

Defining the independent office What exactly does it mean to call yourself independent? An advisor comes up with a definition It’s the eternal struggle in the industry – the often contentious push and pull between the bureaucrats and the advisor in the field. Who gets what? Who has the final say on locations, processes, products and fees? The battles over control of clients and the form of a practice have led many advisors to seek out independence. This issue of WP features some of those offices that have managed to make a clearing and stake their claim as an independent office.

Of course, no advisor is an island—every office has some affiliation to someone who provides things like research, compliance and technology. But some offices exist further from the pull of head offices.

Where along the spectrum can we call an office independent? One advisor, Larry Short, was generous enough to answer our call for outstanding independent office nominations with an epic tale of how he ended up as an independent.

Short is now an advisor with HollisWealth, Scotia Capital Inc., in St. John’s, Newfoundland. He and his team ended up moving firms twice before finding the right company. At one time, Short was a vice president at one of the big bank-owned investment dealers. Like many advisors, Short found himself dismayed at the way the head office encroached more and more to control his practice every year. The dealer specified how much office space he could have and how many staff would be permitted. While he was already paying the salary for ‘extra’ staff, the head office began levying a fine of $24,000 per year per extra staff person, called a ‘head tax.’ Limits and oversight on photocopying and long-distance charges seemed nuts. Eventually, Short headed for the door.

“The decision to leave is always a difficult one,” he says. “On top of everything else, you leave behind some people you loved working with … [But] you have to show your dedication to client service by taking a huge risk and walking out the door.”

The routine legal fight over clients followed. Even-

tually his license was transferred to another bankowned investment dealer. The new head office promised they would never do the nasty things the last dealer had. And things were fine – for a while. But then the new big dealer hired the second-in-command from Short’s previous dealer. Over the next five years, the new bank turned into a clone of the old one.

By this time, Short was a vice president and branch manager over two other advisors. The head office made a decision to build a new local office; they wanted Short to hire five rookies and train them while cutting staff. The successor he had in mind for his practice – a junior associate he had trained to become a full advisor – could only do so if he first went into the rookie program. According to the head office, the potential successor would have to develop a separate book of clients to stay on.

“I wanted him to deal with my clients, not get his own, and I didn’t want to spend more time training someone new while he spent three years trying to get his own clients,” Short says. “The rookie programs at the bank-owned firms are notorious for their 70% failure rate. It’s traditional at these dealers to hire 10 prospective advisors in the hope that three are successful. I don’t like that high failure rate. I saw too many young people have their finances, egos and lives ruined needlessly.” He was certain that his protégé would make it through, but why put him through the agony?

No way, said the head office. Eventually, it was too much. It was time to move on again. Short kicked the tires at the big Canadian bank-independent firms.

“We decided to move one more time. But this time we wanted real independence. We looked around at the options. We came up with a number of criteria that would have to be satisfied if they were going to move again,” he says. His hard-fought experience led him to distill the definition of “independent” down to seven points.

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THE INDEPENDENT LIST 1. The advisor owns the client relationship, and this is clearly spelled out in the contract. This is the big one.

It’s the advisor who works with and knows the client.

“We demanded to own the client relationship,” Short says. “And if we choose to leave, we do so in a professional, gentlemanly manner. Within 45 or 90 days, we would be able to transfer all client relationships without the organization coming back to solicit our clients or register a nuisance suit against us.”

2. The advisor controls hiring and pay decisions. “We wanted to hire and pay staff as we see fit,” Short says.

“We want to be able to hire so it reflects the local region. At the bank-owned dealers, we were restricted to how many staff we could have.”

3. The advisor designs the branch and controls the office space – including the selection of location. “We decided we had to own the physical branch. We had to be able to select the location and decide whether to lease or buy the space. There have to be minimum standards for maintaining the brand, sure, but whether the location was downtown or in industrial park, that’s up to us. We also had to be able to design the branch. Dan Sullivan at Strategic Coach has studied this – if you put the advisor out in the bullpen with the other partners and staff, you improve revenue by 20%. Everyone knows where the business is going and what’s happening.”

4. The advisor buys their own tech. “When we left one firm, I was amazed at how far the price of technology had dropped. I didn’t know how much more we could get for relatively little cost. Just issue us a set of guidelines, and we will take care of it. This way, we can select exactly what is needed without having to worry about what equipment the other 40,000 employees at the bank are using. “ 5. Have an open product shelf and “place neither an enticement nor a chastisement thereon.” “We have to be able to go anywhere for product. If you are going to be an unbiased advisor, you have to able to offer anything, no matter who is making those products. The products have to be approved by the firm for compliance purposes, but if it is legal, you have to able to sell it, wherever it comes from.”

6. Revenue and cost figures must be fully disclosed.

Short says there was always confusion as to how much revenue was generated by insurance transactions.

Firms outside the bank-owned insurance agencies were stating that the insurance revenue posted to the advisor’s grid was dramatically understated. Short wanted to see the full amounts paid to the firm and what his real cut was. “It was a simple question that

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I could never get an answer.” As for costs, he was once spent half an hour on the phone to a head office explaining why he bought Earl Grey tea for the office (client request) rather than standard tea.

7. The firm must have leading-edge thinking. “This was the hardest part to quantify. Generally you want to work with the smartest people in the business, those looking out not just to the next quarter, but to how the industry will be changing in the future and how they are getting in front of those changes in a proactive manner.”

Eventually they found this. Short has little doubt that the standard contract combined with great leadership is the key ingredient. “To be able to walk away with your business intact, or sell it to someone outside the bank, is a great comfort in the changing marketplace. My future is not in a bureaucrat’s hands. It is in my own, independently.”

The plight of the independent At the end of the day, Short is looking for a head office to offer compliance, supervision, research, trading and reporting platforms. “We interviewed a good number of companies. We chose one and got the contract we wanted,” he says. “It is a standard contract, with no need to modify it.” Eighteen months after Short signed with the independent, a big bank bought the firm. “I thought, ‘Damn ... here we go again.’ But – and this is big – the bank has honored our contract. We have all the benefits we had with the independent, plus a few more benefits – particularly stability – and some product offerings we did not have before,” Short says.

Another important clause Short demanded: an ability to sell the book at retirement on the free market. “At the bank, retirement meant that our book could only be sold to the bank. As the only buyer, they set the price, and the sale is counted as income. There is no hope of ever getting incorporated or getting competitive bids.

The independent gives me the flexibility to obtain multiple bids or sell internally to my successor at negotiated prices.” Which is key, but this is “what the independent is looking for. The big firms will wear you down as much as they can.”

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Dan Bastasic Jeff Sujitno QV Investors David Taylor

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Brad Radin Leon Frazer Larry Sarbit Ben Cheng

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COVER STORY / INDEPENDENT OFFICES

U T

Outstanding independent offices: The unique practices

making space outside the big banks The top 12 fund manufacturers control a vast percentage of fund flows. Can a Canadian advisor hoping to offer an independent office and an open shelf for clients survive? You bet. These are some of the offices doing it STENNERZOHNY INVESTMENT PARTNERS+

Thane Stenner

Thane Stenner and Youssef Zohny lead a team of eight investment professionals. Part of Richardson GMP, the office delivers services to ultra-high-net-worth investors and families across Canada. Minimum net worth is typically $10 million plus. There is a $3 million minimum for investable assets – $5 million plus is the recommended amount to ensure access to exclusive deals, even better fee pricing and fuller diversification.

They do not invest in through in-house or proprietary products – third-party investment managers and ETFs only, please. This is high-end stuff. The two principals of the StennerZohny Investment Partners+ recently sat down with WP to talk about the business.

WP: What makes your practice unique?

Youssef Zohny

Thane Stenner: First, we have a very highly targeted focus on the types of client we wish to deal with.

Typically they’re entrepreneurs, either past or present, or executives, presidents, or founders of companies, as well as some ‘next-gen’ inheritors. Secondly, we deal with 48 families from across Canada, so we have a national practice versus just a regional practice, and we have an excellent platform within Richardson GMP from which we can serve them. The third thing, we have eight professionals on our team who serve those 48 clients, so we have a six clients per professional

ratio. From a client service point of view, we’re a very high-touch practice.

Youssef Zohny: We purposely have fewer, more meaningful relationships with clients, and we really tailor our practice and our services to suit our clientele.

WP: What’ the advantage of being independent?

TS: Well, the number-one advantage seems to be the freedom to recommend the best products and solutions to clients. We do not have any in-house products, so it gives us the platform to view anything and go anywhere – obviously, within a tight risk-management model. But basically we’re able to recommend whatever we deem to be the best fit for our clients.

Secondly, as the largest independent firm in Canada, we seem to see a lot of very unique, niche investment opportunities before they get too big ... which is where I think some of the outsized returns can come from.

We’re very selective in terms of investment opportunities that we source for our clients. We have come across what we believe to be exceptional investment opportunities over the year. We probably see over 1,000 a year, and yet we’re able to hone in on one to three top ideas per month, so we have very exclusive access to certain opportunities. We do a ton of research and due diligence.

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COVER STORY / INDEPENDENT OFFICES

YZ: We give unbiased advice, given that we have no in-house product. This really helps us find better solutions for clients. Our goal is to find the best investment opportunities. To do that, you have to be independent, and that’s how you perform for clients.

We also add ‘Tax Alpha’ to our client portfolios, and we look for different structures to help minimize the client’s taxes and provide a more efficient portfolio.

TS: This is another thing makes our practice unique – a really strong focus on ‘Tax Alpha’, which is a phrase that we’ve got trademarked. It means really minimizing the tax frictional cost to wealthy clients and their portfolios/estates.

WP: What’s the secret to building an outstanding office or team?

TS: One is a laser focus on who your preferred client is, and then being very focused on them and knowing how to serve them exceptionally well. Timely client service – I mentioned the 6:1 ratio of clients to professionals within our practice, which I believe is considered very high in our industry. The third thing would be that we have a discretionary investment management platform that allows us to manage the bulk of our clients’ portfolios very efficiently. We also have a ‘special situations’ part of our practice where we can add between six and 10 outstanding investment opportunities each year out of the 1,000 that come across out desk.

WP: Have you ever considered joining a larger network? Why? TS: Yes – in fact, we’ve been approached many times over the years. A number of the big banks have tried to recruit us and our team over the years, which we are flattered by. The big banks do provide a lot of advantages, so there are pros and cons of both systems – working within a large independent and a bankowned firm. We happen to be residing within the largest independent firm in Canada with just under $30 billion in assets, so we’re competing very, very well head-to-head with the bank-owned firms.

WP: Do you think independent offices will have to grow if they want to thrive, or will there always be a place for a range of independents?

TS: I think that there will always be a place for various sizes of independent firms. Again, we’re in a niche area. I think the next largest independent firm is around $7-9 billion in assets under administration, so we’re three or four times larger than the next one. But

I do think that there will be a lot of investors, not necessarily in the high-net-worth field, but in the mass market that will require services from smaller independent firms as well as dealing with the banking channels.

WP: What advice would you give to advisors who want to set up or move to an independent firm?

TS: Several things that jump to mind … one would be, how much of an entrepreneurial spirit does that person have? I think it’s important for them to reflect on their own personality and their own mindset and really take a hard look in the mirror and ask themselves whether they have the entrepreneurial skills. A lot of people love working within the bank-owned firms because they have a brand on their card that’s been around a long time. It’s very established, and they kind of rely on that brand behind them, whereas working for an independent firm, there is a bit more flexibility for the entrepreneurial-minded person. You have to take it back to your own internal sense of security ... do you feel like you need the brand of a bank to build your business? Some do, some don’t.

Also, don’t try to be all things to all people. Have a targeted type of client and go straight for that. Have a lot of discipline. But also be reflective and understand your own skill set. In essence, I ask ‘Am I a good money manager? Am I a good relationship manager? Or am I a good marketer?’ How a person sets up their business or develops their business over time is a function of understanding those key initial questions. What type of client do you want to be dealing with?

WP: What’s your strategy for generating new business?

TS: We’re not trying to grow our business for the sake of growing our business – we want to grow it with a very high degree of exceptionalism. We’re now at a place where we’re virtually almost 100% introduced by referrals only – similar to a heart surgeon or another specialist. Basically, it’s our clients or our ‘center of influence’ network that are introducing us to potential clients at this point.

We’ve purposefully set up our business model to only take on anywhere between eight and 10 new key relationships a year. We want to make sure that we have a lot of enjoyment working with them, and we want to enjoy growing the relationship with them. In our business, we’re probably going to grow to 70 key relationships in the next three years and then cap it at that point.

26 | DECEMBER 2014

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COVER STORY / INDEPENDENT OFFICES

WP: What trends have you noticed this year? How have you had to adapt to accommodate those trends?

TS: The main trend that we’ve seen is ‘greed is back.’ This is leading us to review risk profiles with clients to ensure there’s no ‘risk-drift,’ as we call it – reviewing investment policy statements and reviewing risk profiles/portfolios. At the end of the day, we think that over the next three years there’s going to be a lot more volatility, so we’re positioning more hedges and looking at more alternative investments to protect against, and profit from, a more volatile market environment.

At the end of the day, it comes back to understanding what is the ‘value-at-risk’ [VAR] of each client? What’s the true risk profile of each one of your clients? Ensure you know it, and that you have those conversations with them. The time to be planning for volatility is before it happens, and we happen to think the next three years are going to be a lot more volatile. So we’re purposefully preparing portfolios and clients now for this.

A lot of the investment strategies that we’re utilizing or implementing right now are lower-correlation investments, alternative investments ... things that can go long and short – the market and market neutral type instruments and hedges.

We just think that a hedged portfolio over the next 12 to 36 months is going to pay a lot of dividends.

Number of employees: 8 Assets under management: $250+ million Assets under advisement: significantly higher Location: Vancouver, with clients across Canada Website: www.stennerzohny.com

YOUR WEALTH PARTNER *Compared to the S&P/TSX Composite Total Return Index. Volatility is measured by standard deviation of the daily returns over the periods June 18, 2008 to March 9, 2009 (Fund: 12.50, Index: 56.01) and April 5, 2011 to October 3, 2011 (Fund: 6.10, Index: 23.11). Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. The information presented is accurate at the time of first printing, and is subject to change without notice.

Management fees for Class A and Class F units are outlined in the Fund Facts and Simplified Prospectus.

Please read the Fund Facts or the Renaissance Investments Simplified Prospectus before investing. Mutual funds are not guaranteed, their values may change frequently and past performance may not be repeated. ® Renaissance Investments is offered by, and is a registered trademark of CIBC Asset Management Inc.

Eighteen years ago, Kelly Fagundes was working as an administrative assistant. She knew nothing about the wealth management industry. But she began learning, helped build the practice and got licensed. Fast forward to today: Kelly is a partner, along with seven like-minded independent advisors, in a busy office in Etobicoke, Ontario. They’ve stuck together now for 15 years and four dealership changes.

Today they run their independent practices through Manulife Securities, both their MFDA and IIROC arm, as well as their insurance division. The partners share 100% of the costs of the office equally, regardless of the size of the practice, through a cost-sharing agreement. But the real key is the collective spirit, fostered through community engagement. The group mentors young students from neighboring colleges; at Christmas, they help the Hope-for-Children foundation.

Monthly potluck lunches mark birthdays. The advisors range in age from 33 to 70, providing diversity in strength and experience. “The associates are always happy to lend a hand or participate in daily exchanges of ideas,” Fagundes says.

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WEALTHPROFESSIONAL.CA

WP: What makes your practice unique?

Kelly Fagundes: One of the most important advantages of being independent advisors is that we get to work for our clients and not a big institution. While Manulife Securities would seem fit the description of being a ‘big institution,’ they have always encouraged our independence. We own our own practices and are free to be truly independent in the products and services we provide our clients. This means we can offer unbiased advice at all times without quotas or expected production targets.

WP: What’s the secret to building an outstanding office?

($ Value in 000)

KF: You need to have like-minded partners who are willing to share their ideas and look out for one another. We are not only partners at work, but friends outside of the office, too. Our families have gotten to know one another over the years, and it truly speaks to the quality of the group, which in turn reflects on the service we provide our clients each day.

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will there always be a place for a range of independents?

KF: Over the years we have been made several offers – lucrative ones, in fact – that in the end did not make sense for our clients. It would mean giving up our independence, and none of us wanted to do that. We would not have been able to build up our practices as we did had we accepted those offers, and our clients would definitely not have been better off for it.

2011 Downturn

5 No

WP: Do you think independent offices will have to grow if they want to thrive, or

Global Financial Crisis

Renaissance Optimal Income Portfolio S&P/TSX Composite Total Return Index

WP: How do you think independent offices can continue to thrive with such steep competition from the big banks?

KF: Competition from the ‘big banks’ has always been there. In fact, the bigger and stronger the banks get, the better we look. Clients don’t like high turnover in bank branch advisors and the lack of personal service. The advisors at these bank branches are limited as to what kind of advice they can provide to clients.

They are also not paid very well for their expertise which speaks to the high turnover. As independent financial advisors, we have higher payouts, this means we can afford to concentrate on a smaller number of clients leading to better, personalized service.

WP: What advice would you give to advisors who want to set up or move to an independent office?

KF: Just join us! Going out on your own can be tough, but it can be done. Being entrepreneurial and self-motivated is key. You’ll also have to be a good team player.

I’m not so new, and neither are any of my partners, but we do recognize the challenges present to anyone new entering in this field. Competition is tight, and working as an independent advisor one doesn’t get the comforts of a salary. It can be quite scary and difficult for someone looking to build up their practices from scratch unless they have the right personality – and most importantly, entrepreneurial spirit. You have to believe that with great risk comes great reward.

Learn how Renaissance Optimal Income Portfolios meet real client needs at

realoutcomes.ca

Number of employees: 17 Assets under management: $300 million Location: Etobicoke, Ontario Website: www.wealthpartner.ca

DECEMBER Source: Morningstar Direct as at September 30, 2014 2014 | 29

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COVER STORY / INDEPENDENT OFFICES

CARING FOR CLIENTS

staff and technology. I spend very little on marketing.

WP: How do you think independent offices can con-

Rona Birenbaum

Rona Birenbaum runs Caring for Clients, a successful advisor office in downtown Toronto. Her cheerful but mindful and present attitude makes clients feel right at home. She has been fee-for-service since 2000, which was not a popular model back then. “We believed that the commission-based model was great for the advisor, but potentially costly to the client,” she says. Today, her office is ‘planning-focused.’ “We will not recommend products without completing a comprehensive financial plan on a fee-only basis. The life plan drives tactical decisions such as investment and insurance purchases, not the other way around.”

The team is committed and engaged. Turnover is low. As a result, the Caring for Clients team knows the clients well. “Many clients complain that their previous advisor firms had high turnover, meaning that they had to ‘tell their story’ over and over again through the years,” Birenbaum says. The firm is also careful to address family conflicts, emotional obstacles and the ‘baggage’ that all clients bring to the table. “This is a key differentiator for us. We are known as problem solvers, and our clients often call us first when they need non-financial advice and support.”

WP: What’s the advantage of being independent?

Rona Birenbaum: Oh, where do I begin? I worked at a bank-owned brokerage firm before becoming independent, so I certainly know the differences. An important one is that there are no revenue goals or quotas.

This means that there is no management pressure to sell or generate a certain level of income. My advice can be solely driven by what is right for the client rather than what will generate the highest commissions. As well, no asset goals or quotas – the major bank owned brokerages expect advisors to bring in millions of new assets under management every year.

Again, without this pressure, I can be selective about the clients I take on and am under no pressure to grow my business for any other reason than additional clients want to deal with me and my team. I don’t have to spend time marketing and recruiting new clients.

That means my time can be spent on the things that benefit clients most: client facing time, research and analysis, improving business practices, ongoing education that enhances the value of our team. I have control over my expenses. As a result, I have decided to make a much higher investment in staffing than I otherwise could. I invest in education for me and my

tinue to thrive with such steep competition from the big banks?

RB: Canadians are becoming much more financially literate and industry savvy. They are beginning to see the advantages to working with an independent advisor.

This awareness will ensure that the independent model will continue to exist. There will always be a percentage of advisors who see themselves more as entrepreneurs than as employees, who see financial advisory as a career rather than a job. And they will need a home from which they can serve their clientele. That being said, the number of independent offices is shrinking.

In my view, this is largely due to the increasing cost of adhering to the ever increasing regulatory and compliance requirements. I support regulation and oversight; however, we are approaching a point where the increasing costs will undermine the affordability of advice. This is where the banks have an advantage.

They have economies of scale that allow them to spread operating costs over a very large client base.

WP: What advice would you give to advisors who want to set up or move to an independent office?

RB: Let’s talk! I love talking to advisors who are considering a change. I made this change 15 years ago and never looked back. Secondly, don’t be afraid. Many advisors hesitate making a move because they worry that their clients won’t move with them, or that prospective clients won’t want to deal with them if they are working with an independent firm. If an advisor is concerned about losing clients, it isn’t the dealership that is the problem; it is the client relationship.

WP: What is your strategy for generating new business?

RB: My growth strategy is very different now than it was when I started my practice 19 years ago. New clients now come from three sources: referrals from very satisfied clients, referrals from my business network that I have established over the years and individuals who reach out to us after reading an article I’ve written or been quoted in or find us on the internet.

Number of employees: 4 Assets under management: $115 million Location: Toronto Website: www.caringforclients.com

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COVER STORY / INDEPENDENT OFFICES

ROBERT SMITH FINANCIAL Curious about new practice models in the industry?

Robert Smith and Blair Isaac have been running what is called a ‘portfolio managed practice’ for several years now. What this means is that client accounts are managed on a discretionary basis by a licensed portfolio manager – or as one large portfolio, basically. The advantages are multiple: Fees are flat. Reporting is accurate. The model is CRM2 compliant. The investments are not restricted to just the typical largest 44 stocks on the Toronto stock exchange, but can include F-class mutual funds, individual stocks, bonds and ETFs (including commodity and currency ETFs) – whatever investments are called for by the investment policy atatement as signed by the client.

Interestingly, by having assets managed at a ‘practice portfolio’ level, clients are treated equally during purchase and sale of investments through the use of block trades. In non-discretionary accounts, the advisor must call each client to receive permission to buy or sell an investment. If an advisor has 197 client families (the average number for of IIROC advisors in 2013), there is, according to experts, a question as to which client gets the first call and what the order of the calls will be. That is, client 197 may not get the call to make the sale/purchase for several days after client number one receives the first call.

But in a portfolio managed practice, the client book is traded by the advisor like a single institutional portfolio. All similar trades are done at the same time.

The block trades ensure all the clients’ positions are sold and purchased at the same time.

There is a more serious fiduciary duty to the client in this kind of practice, according to supporters. More than just meeting the ‘suitability requirements,’ the advisor has to think about the client first. While a house bond fund may be suitable for a non-discretionary client, fiduciary duty compels the manager of a portfolio managed practice to purchase the best solution, regardless of what company manufactured it – even if it’s a rival bank or brokerage. “This formally places the interest of the client ahead of that of the firm or the advisor,” according to Smith.

So far, this practice model is rare in Canada – just 4% of advisors are portfolio advisors. And no wonder.

The license to trade on a discretionary basis is a powerful tool. The designation is difficult to obtain. Advisors have to pass additional exams and be approved

by the internal Compliance committee as well as IIROC. Advisors hoping to gain this license also have to be supervised as an associate portfolio manager for two years before being granted full license.

Nevertheless, according to the individual who nominated Robert Smith Financial, “These gentlemen are running an exceptional practice. They are operating independent of the bank. This office is highly innovative.”

The firm takes pride in the fact their client base has grown not through marketing campaigns, but through unsolicited referrals. Maintaining the quality of the work keeps them busy. Advice is comprehensive.

In addition to investments, the partners do taxation, estate planning and debt management. Both Isaac and Smith are CFA charterholders, as well as licensed portfolio managers. They complete the vast majority of their clients’ tax returns, and provide tax advice on the use of incorporations and family trusts. They are also licensed to advise and offer life and disability insurance products. They help clients draft wills and POAs and negotiate mortgages.

“In essence, any decision a client has to make that involves money, we will try to add value one way or another,” Smith says. “We offer truly comprehensive planning for our clients – a one-stop shop and coordinated approach. A client’s security is much more assured when we have the various financial components working together in harmony.”

Number of employees: 3 staff, 2 advisors Assets under management: $135 million Location: Markham, Ontario Website: www.robertsmithfinancial.ca

OSSIE FISHER, PROFESSIONAL INVESTMENTS There are few advisors who can claim more experience than Ossie Fisher. His office in Kingston, Ont., is the center of the Professional Investments network of advisors. The chain is home to 55 independent advisors in offices in Ottawa, Bellevillle and Brockville. But it is Fisher who is most interesting. His resume goes right back to the very beginning of the industry. According to the person who nominated him, “This company is one of the last standing independently owned financial planning houses. The ratio of CFPs

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COVER STORY / INDEPENDENT OFFICES

in-house is outstanding. Even with all the new compliance rules that come down the pipe, there is only one cardinal rule at this business: Do unto others as you would have done unto you. Many a Canadian family has retired wealthy due to Mr. Fisher’s kind and intelligent guidance.”

The nominator suggested Mr. Fisher has been in the business since the first year mutual funds were offered in Canada, but Fisher himself corrects this.

There were already a couple of mutual funds being offered by 1957, but he didn’t start selling mutual funds until four years later, in 1961. In the late 1950s, Fisher was working in a wholesale firm. “Someone from the mutual fund industry approached me,” he remembers.

“The idea of a mutual fund was new to me. But it made so much sense. For $30 a month, the average person could invest like the big guys, like the pension funds could.”

Originally, “when you talked about mutual funds, clients had never heard of them,” says Fisher. Investors used to only buy single stocks – if the company went out of business, the investment disappeared. “This was a way to make investing safe for clients,” Fisher says.

“Once people understood this, business began to improve.” It took a while. In the early days, the banks and insurance companies told people to stay away from mutual funds. So Fisher spent a lot of time educating the population. “When we sold the mural funds, we would get the annual report and go through that to show them a name on the board of directors they might know,” he says. “We would try to give them some confidence that this was not a fly-by-night deal.”

Today, Fisher considers the opportunity to help people retire in comfort a blessing. “I got into this because I was poor. I had spina bifida, and I didn’t want to travel much. I couldn’t move much. But now, I sit here and talk to the old friends who come in, the ones who I’ve made some money for. I like the fact you spend your time working on something help people ... especially when you see independents that have built up their own practice. There is a lot of satisfaction in that.”

The nominator agrees: “I like this guy just because he’s been doing it so long. He is proudly independent, has been making business happen for a long time now.”

Number of employees: 4 (with 55 advisors in the Professional Investments network) Assets under management: $800 million in the dealership Location: Kingston, Ontario Website: www.pro-invest.ca/ofisherpro-invest-ca

WILLIAM DOUGLAS GROUP INC.

William McElroy

A small boutique-style firm in Burlington, Ontario, the WDG office is part of the Manulife network, but proudly independent. “I have a staff of two, and we are a completely independent fee-based office with no company biases,” says president William McElroy.

“Since we are fee-based, there is no motivation to move our clients into any product that we do not think is the best for them. We do all of our own research and have limited contact with most wholesalers. As a result, we never feel obligated to sell anyone’s product unless we believe it is best for the client.”

WP: What makes your practice unique?

William McElroy: Our office is unique in that we bring both financial planning and wealth management to the table in a very friendly and casual atmosphere. We meet with clients around a coffee table, not across a desk, and we listen a lot. When we do speak, it’s always at a level the client can understand. We leave the financial terms and charts at the door unless the client wants to engage us at that level. This business is all about trust, and you need to nurture the client relationship. It takes years to build trust, and if a client feels uncomfortable around you, it doesn’t matter how much you know – they will eventually move on.

WP: What’s the advantage of being independent?

WM: Probably the biggest advantage is not having an obligation to sell anything we are not comfortable with. All too often I come across portfolios that are overweight with proprietary product from banks and other dealers. This is concerning, because we have a fiduciary duty to the client to provide them with choices that are best for them, not our dealer. It’s never hard to discredit these proprietary portfolios because they typically have some underperforming funds. You can’t have all your eggs in one basket if you want to maximize returns and minimize risk.

It’s just that simple.

WP: How do you think independent offices can continue to thrive with such steep competition from the big banks?

WM: People like familiarity and the relationship that builds between advisor and client. This cannot happen at the big banks because they move staff around too much, which alienates the clients. Communication on a personal level is lacking.

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$213,719.11

Trimark U.S. Companies Fund (as at Oct. 31, 2014)

$158,492.87

S&P 500 Index (C$) (as at Oct. 31, 2014)

$100,000

(initial investment on Oct. 22, 1999)

99

00

01

02

03

04

05

06

07

08

09

10

11

12

13

14

You can’t beat the index by being the index. Look what Trimark’s active management has delivered on Trimark U.S. Companies Fund.

Return Trimark U.S. Companies Fund, Series A (%) S&P 500 Index (C$) (%)

3-month 6-month

Yearto-date

1-year

3-year

5-year

10-year

8.91 12.38 18.06 27.76 23.33 17.17 8.79 11.18 17.78 26.78 24.94 17.76

5.85 7.36

Since inception

(Oct. 22, 1999)

5.18 3.06

All data is as at October 31, 2014.

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Commissions, trailing commissions, management fees and expenses may all be associated with mutual fund investments. The indicated rates of return are the historical annual compounded total returns, including changes in security values and reinvestment of all distributions, and do not take into account sales, redemption, distribution or optional charges, or income taxes payable by any securityholder, which would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Please read the prospectus before investing. Copies are available from your advisor or Invesco Canada Ltd. Invesco® and all associated trademarks are trademarks of Invesco Holding Company Limited, used under licence.

Trimark®, Knowing pays® and all associated trademarks are trademarks of Invesco Canada Ltd. © Invesco Canada Ltd., 2014

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COVER STORY / INDEPENDENT OFFICES

WP: What’s the most important thing an advisor can do to grow and improve their business?

WM: I think the most important thing is to make sure you can offer your clients the product they are looking for. If you only have a limited number of products on the shelf, you will not attract or keep clients. More and more clients are looking for mutual fund alternatives such as ETFs and stocks.

WP: What trends have you noticed this year? How have you had to adapt to accommodate those trends?

WM: I moved to IIROC in 2013 and have noticed a considerable increase in new business, case size and client engagement. I am now more confident talking to high-net-worth prospects that I would not have considered speaking with before because I felt my product offering was inadequate for that market.

needs and objectives ahead of the firm’s and ours. This is why we are members of associations like The Family Firm Institute, along with supporting peer-to-peer networking and support groups. Attending and speaking at such events as the Campden North American Family Office Conference allows us to provide unparalleled access and insight into dynastic families. On the investing front, we provide the families we serve with access to institutional-caliber assets managers who specialize in alternative investments like private equity, real estate and hedge funds. But investing is only part of the story. We work with families on issues such as financial planning, the sale of a business, family governance, next-generation meetings and financial education. We even offer some families concierge services such as having homes built and travel advice.

WP: What’s the advantage of being independent?

Assets under management: $65 million Location: Burlington, Ontario Website: www.wdg.ca

NORTHLAND WEALTH MANAGEMENT

Arthur Salzer

This proudly independent firm is a relative newcomer to the industry. Founded in just 2011, it has been growing rapidly in the expanding, bustling city of Markham, north of Toronto. Don’t mistake the recent birth date as indicating a lack of experience, however.

The firm has become a home for experienced advisors chafing at the restrictions at the big bank-owned offices. Arthur C. Salzer, CEO and CIO, says Northland was built specifically in reaction to firms that funnel proprietary product to their clients.

The average advisor at the new firm has 25 years of experience. Some of the clients of the firm control up to $100 million in assets. The firm focuses on providing clients with access to institutional-level private equity, real estates and hedge fund investments that are typically used by pensions such as CPPIB, OMERs and Ontario Teacher’s in Canada, that would otherwise be unavailable to retail clients.

WP: What makes your practice unique?

Arthur Salzer: Unlike traditional service providers and advisors who recommend products that are suitable, we operate as a fiduciary – we put our clients’

AS: Independence allows us to focus on providing unbiased and sound counsel. Ultimately, when one works at a major financial institution, the internal discussions become about the company and what it deserves to make and less about the clients and the people that serve them. The ‘silo approach” across the divisions within a bank does not help matters either.

I would argue that as an independent firm, we can – and have – created a broader network than what was available when I worked as a bank investment counsel. Not only do we have access to any or all of the investment managers that the bank did, but many more interesting opportunities, not only within Canada, but internationally. We’ve adapted the leading-edge technology … and combined it with an unparalleled global network of professionals who serve families – not just accountants and lawyers, but also counsellors who specialize in healthy family dynamics.

WP: How do you think independent offices can thrive with such steep competition from the big banks?

AS: Independent firms do not operate in the mass market in order to be able to differentiate ourselves from the big banks. We have a very low family to advisor ratio of under 30:1. It can be a challenge to create a service model that is sustainable, as the banks do not refer business to you – don’t underestimate the influence of thousands of bank branches throughout Canada.

Number of employees: 12 Assets under management: $350 million Location: Markham, Ontario Website: www.northlandwealth.com

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Make clients happy with a steady source of retirement income

By Rocco Taglioni, Senior-Vice President, Distribution and Marketing, Individual Insurance and Wealth, Sun Life Financial

Life annuities are making the news

Life annuities are sensible

You may have seen headlines such as, Annuities: A neglected way to buy peace of mind,” “Lifetime Income Stream Key to Retirement Happiness,” and “Happiness in Retirement Is a Steady Income.” 1

A big decision for your clients will be, “How will I have enough money to enjoy retirement as long as I live?”

From Canada to the United States, and straight across to the UK, business reporters attribute life annuities offering guaranteed income for life with making retirees happy.

In retirement, many Canadians won’t receive a paycheque, as they did while they were working. Instead, they’ll draw money from their retirement savings.

Studies show payout annuities – which include life annuities – generating a retirement “paycheque” can make retirees smile.

People with annuitized income are happiest, according to retirees with similar wealth and health characteristics.2 Most middleand high-income earners would likely benefit from directing some of their savings into a life annuity.3 1 2 3 4 5 6

Before suggesting a life annuity as a foundation for retirement income, you can answer some misconceptions they may have about the product.

Myth: I can’t invest in a life annuity, because I won’t have access to my money.

Generally, it’s best for clients to include a life annuity as only a portion of their retirement income portfolio. Discover basic expenses required at retirement and subtract the expected CPP/QPP, OAS, and other retirement income. That will help you calculate how much income your clients will need from a life annuity to cover the rest of the basic expenses.

As a good place to start, you could suggest clients use 25 per cent of their retirement savings to purchase a life annuity.

25%

guaranteed lifetime income

75%

other investments

Creating an investment portfolio with a mix of products, including at least one offering guaranteed lifetime income, allows other products to provide growth and access to money.

Rob Carrick, Globe and Mail, February 22, 2013; Dan Kadlec, business.time.com, July 30, 2012; Alicia Munnell, Wall Street Journal, October 31, 2013.

Steve Nyce and Billie Jean Quade, “Annuities and Retirement Happiness,” Towers Watson U.S., September 2012.

“Annuities and Your Nest Egg: Reforms to Promote Optimal Annuitization of Retirement Capital,” CD Howe Institute, 2012.

Statistics Canada, Life tables, 2012.

LIMRA, 2014.

The average life expectancy at age 65 for Canadian men is now almost 84 years old; for women, almost 87 years old. Thirty-five years ago, it was 80 for men and 84 for women. Statistics Canada, 2012.

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Life annuities are smart

Sales are rising – and for good reasons

One of the biggest challenges for investors to understand when it comes to annuities is the idea of giving the insurance company a large cheque, which they get back in a steady stream of income – the monthly cheques for the rest of their lives.

It’s too early to call it a trend, but sales of life annuities in Canada are definitely increasing.

Industry sales of traditional life annuities grew by 23 per cent in the first half of 2014 in Canada, compared to last year, increasing to over $440 million.55 This strong start in sales shows that advisors and their clients are discovering the benefits of life annuities in retirement portfolios.

Myth: I won’t live long enough to receive my principal back.

How long does it take before you actually get your principal back?

The answer might surprise you.

The growth follows shrinking sales over the past few years.

Why the change?

The average life expectancies of 65-year-old Canadians are age 84 for men and age 87 for women.4 All the break-even points in the chart below occur on or before the average life expectancies for the corresponding ages.

Increased life expectancies are likely contributing to increased annuity sales. Canadians are living longer,66 so they need their retirement income to last longer.

Your clients will be happy to know that after they break even, their life annuity payments continue for the rest of their lives.

An annuity can help your clients cover their basic retirement expenses, no matter how long they live. Then they can focus on the retirement lifestyle that makes them truly happy.

BREAK-EVEN POINTS of LIFE ANNUITIES* 65-year-old man $6,516.01/year

ou u

ed

SPECIAL PROMOTIONAL FEATURE

70-year-old man $7,423.00/year

75-year-old man $8,379.14/year

Break even at

Break even at

Break even at

age

age

age

80.3 15.3

or in

years

83.5 13.5

or in

years

86.9 11.9

or in

years

*Based on $100,000 registered life annuity, with a 10-year guaranteed period, no indexing. Illustrations generated on September 16, 2014.

Most clients will choose a guaranteed period to cover the possibility of dying before breaking even.

The break-even points occur sooner with no guaranteed period.

The following Money for Life resources will help you explain annuities to clients and promote them as a sensible, smart foundation for their retirement income portfolio: Watch the whiteboard video Understanding life annuities with your clients to show them how these products provide a foundation of income during retirement.

To help your clients understand how long they might live, use the Longevity Risk Illustrator tool by going to sunlife.ca/advisor, signing in, and accessing the tool on the Money for Life web app.

Use the Sustainable income demo tool, also on the Money for Life web app, to help clients see how a life annuity can generate additional income during their retirement.

Also on the Money for Life web app, see how our new Annuity & GIC income comparison tool compares the income a payout annuity generates – guaranteed for life – with the income a guaranteed investment certificate generates – and can run out while clients still need it.

Learn more about Sun Life Financial’s retirement solutions from your Sun Life Sales team, or visit sunlife.ca/happiness.

Life’s brighter under the sun Sun Life Assurance Company of Canada is a member of the Sun Life Financial group of companies. © Sun Life Assurance Company of Canada, 2014.

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FUND MANAGER PROFILE

Manager positive about U.S. growth potential Checking in with IA Clarington’s Dan Bastasic

Samhain, or Halloween, is the pre-Christian Celtic holiday marking the shift between harvest and winter. The weather becomes unpredictable. Things are chaotic. And so it is with stock markets. Black Monday, the market crash of 1987 – all happened in October. So pernicious is the phenomenon at this time, there is even a term for it: the “October Effect.”

In that regard, October 2014 did not disappoint.

After several years of equity market growth, a lovely summer saw stock market indexes notch up new record highs. And then fall arrived, and all hell broke loose.

The S&P and TSX dropped triple-digits on several different days. Investors panicked. The volatility played out as has been the case so many times before. But October is behind us now. It’s time to get back to sanity. Let’s talk about where markets go from here.

Way back in the spring of 2014, WP sat down with Dan Bastasic, senior vice-president of investments and lead portfolio manager for IA Clarington’s new Strategic U.S. Growth & Income Fund. At the time Bastasic talked up the potential in the U.S. market, pointing out that five years of recovery had strengthened the situation of the average consumer. Lower consumer debt, a recovering housing market and new supplies of energy were laying the ground for a multi-year investment opportunity. “I am looking for reasons to doubt a U.S. recovery,” said Bastasic then, “and I’m not finding them.”

At that time Bastasic’s predictions seemed edgy, ahead of the curve. Now, post-October correction, he seems prescient. Bastasic’s prediction that the U.S. is the place to be is rapidly becoming de rigueur. The U.S. dollar is rising. Many 40 | DECEMBER 2014

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managers are now talking about a U.S. recovery. In the wake of the October volatility, we checked back in with Bastasic.

The good news: He is still confident there will be a U.S. recovery. “I think we’re range bound here for the next 12 months. But yes, we still think the U.S. economy, and by default, the Canadian economy, are the two preferred economies to be overweight,” says Bastasic.

Down south, the private economy is growing at 3%.

Stock markets are not a huge domestic risk – “valuations aren’t stretched,” he says (especially post-correction).

Consumers have had six years to mend personal finances that were thrashed in the immediate wake of the Great Recession. The average American shopper is de-leveraged, recovering and in better shape. Don’t overlook the fact that the U.S. is more independent in terms of oil production. The upside on that story is that new tax and royalty revenue will flow into the U.S. government’s pockets in greater amounts than has been the case for some time. When it comes to monetary policy, “the Fed has been giving good and transparent direction on where it is going and what it is doing,” Bastasic says. “There will be a market sell-off after the Fed increases rates for the first time in years. But we don’t think we want to be completely defensive. We see a lot of positive things going on.”

Things are certainly better in the U.S. than in Europe, where a recovery is at least a year and half behind the one in the U.S. The “distributed” nature of the European political system makes it hard to enact the kind of unified central banking policy that the Federal Reserve can implement in the U.S. “Europe has a unique problem. The region is an economic area, but it is still made up of many different states,” Bastasic says. “The differences and fissures make it difficult to implement a single economic policy. They just can’t get everyone together. Some regions are slowing, other regions are growing. This is not the case in the U.S., where stimulus measures have been implemented more forcefully. This deep, structural difference between the two regions is one of the reasons the U.S. dollar is rising.

But, as Bastasic points out, “you’ve got to expect the Fed is going to want to get back to natural growth.”

The so-called quantitative easing programs the Fed has implemented to keep markets buoyant will have to give way, at some point, to a more ‘normal’ central banking policy. This could create some more volatility.

But Bastasic will consider any market dips an opportunity to buy. Which is what he thought about the most recent correction: “We’ve been adding

positions over the last week and half,” he said in October, shortly after the correction. “Some solid names were down 15% when the market was down 8% and 9%. Energy, especially natural gas, really took it on the chin,” he says. “That’s not a good a scenario for Canada. But we like natural gas, which was unduly thrown in with the oil trade ... The only thing that changes this outlook is, do we get a recession? That’s our worry.” Some worry the Fed could be too quick to raise rates if a recovery arrives, cutting off nascent growth. But things don’t look so bad now that the nasty October weather has cleared. “Over the next 18 months, what is out there to cause a recession, other than an overactive Fed?” asks Bastasic. Good riddance to October. Bring on a new year.

UNITED STATES OF GROWTH Sure, there are worries about the global economy. German industrial plunged a heart-stopping 6% in the summer. And China seems to be slowing from the hyper growth of years past. But there are signs of growth about. Many are talking about a U.S. recovery. The idea seems to be the thought du jour. In a recent interview, Thomas Caldwell, CEO of Caldwell Securities Ltd., mentioned he is overweight in the United States. “I’ve been enjoying the rise of the U.S. dollar,” he told WP (see page 54).

Some other recent good signs of growth in the American economy: The AFP Corporate Cash Indicators reported that U.S. businesses had sharply slowed the accumulation of short-term cash during the third quarter. That is, the cash holdings of companies are smaller than they had been a year earlier. The suggestion is that corporations are starting to spend the cash they’ve built up on their balance sheets since the Great Recession.

Much has been said about the massive piles of cash in corporate coffers.

Companies, worried about growth, had been keeping the powder dry. Profits have been good, and so there are piles of cash in corporate bank accounts. But now it seems that for the first time since the recession, more companies than not had lower levels of cash on the books – also a good sign.

Another positive development for the American consumer is the plunge in the price of oil., As gasoline prices fall, more money is left in the pockets of consumers. This should help lift household purchases, which make up almost 70% of the $16.8 trillion U.S. economy and have climbed an average 2% in the recovery that’s now in its sixth year. Economists expect spending growth to accelerate to 2.7% next year after 2.3% in 2014, according to a recent Bloomberg survey.

Another positive bit of news involves growth in jobs. The FOMC announced the end of QE3, as was telegraphed at the last meeting. The tone of the statement was a bit more hawkish than the market was anticipating. “Labour markets and the economy are doing better. Labour market underutilization was no longer deemed ‘significant’ and is now ‘gradually diminishing,’” says Michael Gregory, CFA, deputy chief economist and head of U.S. economics for BMO. “It was also important that in referring to household spending, the Fed said it ‘is rising moderately’ instead of ‘appears to be’ before. There are now enough jobs being created to generate sufficient income growth, despite sluggish wages, to make the Fed feel more comfortable about the 70% of the economy called household spending.”

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Let the happiness begin Happiness is knowing that you’ll never outlive your money. Canadians are living longer than ever, and that’s one of the reasons 45 per cent are worried about outliving their retirement savings.* How do you design an income strategy that will last? Consider allocating 25 per cent of a retirement portfolio to a payout annuity from Sun Life Financial. Your clients will have their basic retirement expenses covered, no matter how long they live. And that’s a gift that keeps on giving.

It’s part of Money for Life – Sun Life Financial’s customized approach to retirement planning.

Contact your Sun Life Sales Team to learn more.

25% in a payout annuity is a good place to start the retirement portfolio conversation.

sunlife.ca/happiness *2014 Sun Life Canadian Health Index.

Sun Life Assurance Company of Canada is a member of the Sun Life Financial group of companies. © Sun Life Assurance Company of Canada, 2014.

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Life’s brighter under the sun DECEMBER 2014 | 43

2014-10-21 3:56 AM PM 18/11/2014 6:29:10

WEALTHPROFESSIONAL.CA

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INDUSTRY ICON / THOMAS CALDWELL

A living legend

revisits a life on Bay Street

Thomas Caldwell entered the IIAC Hall of Fame this fall.

The legend reminisces about the journey that got him there It is one of those clear, brilliant fall days – midOctober, unlimited visibility, an electric blue sky. The doors of the elevator open on to the 17th floor of the Sun Life building at King and University. Elizabeth Naumovski, vice president of marketing at Thomas Caldwell Securities Ltd., leads the way to a grand and impressive glass-walled office with an amazing view of the downtown and the Toronto islands. The firm’s namesake comes in a couple minutes later.

Eager and vigorous, Thomas Caldwell’s familiar compact frame, topped with that shock of white hair, moves with the kind of hustle and purpose of someone

THOMAS CALDWELL: A LIFE IN CAPITAL MARKETS

1965

Graduates from McGill University

1966

Marries wife Dorothy

1970s

Works institutional bond desk

1980s

Caldwell Securities founded

much younger. Those who have met him know the spark, the energy. His confidence is comforting.

Here in the fall of 2014, the effects of the Great Recession still linger. The global economy is sluggish.

Interest rates are weirdly low. ISIS is generating a $1 million a day from black market oil sales. Canada is sending jets to Iraq to deal with the situation. An attack on Parliament Hill is just a few weeks gone.

A decade and a half after the tragedy of 9/11, the war in Iraq has come and gone; so has the Great Recession.

The old, optimistic days of the late 1990s seem quaint and naïve, here in the fraught early decades of the

’80s and ’90s Pioneers Canadian advisor channel

Famously takes out series of full-page ads in the Globe and Mail to comment on national issues

Buys up a quarter of New York Stock Exchange seats just before demutualization

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new millennium. With the late autumn sun creating gauzy haze over the scene, Caldwell takes a seat and puts his mind to making sense of it all.

Caldwell is to be inducted into the IIAC Hall of Fame in two weeks. He seems happy to take a few minutes off work to revisit his life and career. As is the way of the intellectually adventurous, Caldwell mixes into the story an fascinating string of digressions: astute observations about the dynamics of free markets, lessons on geopolitics, Canadian military history, the history of Canadian finance, market calls, the importance of religion, musings on the next market scandal and some brilliant observations on the banality of the psychology of the modern financial professionals. The conversation is pure vintage Caldwell – free-ranging, informed and fascinating. In other words, what you might expect from a Bay Street legend who managed to climb to the top of the heap by sheer force of will.

HUMBLE BEGINNINGS Caldwell’s story starts with that classic Canadian origin narrative – his father, an immigrant Irishman, operated a meatpacking business (a sausage factory) in Toronto’s west end. The young Caldwell picked up a key idea that he would apply in his own life: “Be your own boss.” A hard-fought climb to legend status followed.

As a McGill student, Caldwell needed a summer job. He knew he wanted to be on the Street. “A friend was in the industry. There is something about the open-ended education and learning that goes with markets that appealed to me,” he says. “I knew I wanted to be in this industry. I could have sold aluminum doors. But I wouldn’t last at that—I would know everything I needed to know in four months.

I liked the idea of that constant education.”

One spring morning, he started at the bottom of Bay Street. He began walking north, knocking on any door that had a financial-sounding name and asking for a job. Eventually the man behind the counter at one of these places saw the spark and offered him a

2000

Appointed a Member of the Order of Canada

2002

Awarded Her Majesty’s Golden Jubilee Medal for his activities on behalf of Canadian veterans

2012

Receives Her Majesty’s Diamond Jubilee Medal for his efforts on behalf of the disadvantaged

“I was working under all these guys.

They had come back from the war.

That was the adventure of their generation. They had seen it all.

They wanted to come back and build this country. And they did” position. He was in. George Stewart was going to give him his shot. Caldwell started out as an institutional bond trader in 1964.

At the time, the bond firms were the heart of the financial system on the Street. The idea of selling mutual funds to a huge crowd of retail clients was not the part of the industry it is today. Stand-alone investment banks like Dominion Securities, Gundy, Nesbitt and Burns Fry were busy building out the country’s infrastructure. “Everything came out of the bond-issuing firms,” says Caldwell. “Those firms were the companies that built this country. The investment bankers would go out to Calgary and ask, ‘Do you want an electrical system?’ The firms would raise the money, build the infrastructure. This is how the country’s infrastructure was built.”

The old names like Deane Nesbitt and Charles Gundy (inducted posthumously into the IIAC Hall of Fame) were the legends of the day. “I was working under all these guys,” Caldwell says. “They had come back from the war. That was the adventure of their generation. They had seen it all. They wanted to come back and build this country. And they did. It is amazing to think about what they did.”

It was another era. Offices featured legions of secretaries in typing pools to work up all the documents that had to be drafted. In the backrooms and the mailrooms, World War I veterans toiled. “They had a taciturn air about them. You knew they had Board of Associates of the Whitehead Institute for Biomedical Research at MIT

Board of the Conference of Defence Associations Institute in Ottawa

2014

Appointed Honorary Lieutenant-Colonel of The Lincoln and Well Regiment

2014

Inducted into the Investment Industry Association of Canada’s Hall of Fame

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INDUSTRY ICON / THOMAS CALDWELL

WORDS OF WISDOM Visitors to Caldwell’s office come away with a copy of his published book, The ‘Success’ Dictionary, an A-to-Z collection of his thoughts and aphorisms, such as: Competitive: In your corporate life, be competitive externally, not internally.

Financial problems: Financial problems rarely exist. Financial symptoms are the norm. What we see as a problem is, in reality, often a symptom of a real underlying problem.

Find and deal with the ‘real’ problem, and financial symptoms will evaporate.

Long-range plans: They are often a form of procrastination. What are you going to do today?

Loyalty: If you expect loyalty, you must give it. Organizations that demand it up the line, yet never give it down the line, are ongoing disasters in terms of morale.

Rich: If you want to be rich, start by giving money away.

Don’t confuse being rich with being smart.

Self-interest: Bury it helping others. You will be taken care of.

Wolf pack: The strength of the wolf is in the pack. The same is true for us.

ON EV

“They had a taciturn air about them. You knew they had seen something others could not comprehend” seen something others could not comprehend,” says Caldwell. The live trading floors carried with them all the daily human camaraderie, interaction and competition one could handle.

“Bond trading was based on relationships, personal connections. It was a different world than today,” Caldwell says. “The trading among bond dealers was personal. You didn’t cross someone, or you would end up in a fight at the annual bond trader’s dinner. Those were some amazing gatherings.

Sometimes everyone would end up in a fight at the end of the fight. There were some legendary personalities back then. Part of it was the booze. But they were real Runyon-sequel characters. I loved the excitement. They were bigger than life. It’s not like that today. It seems that’s not a part of the culture of street anymore. Personalities are a little more corporate today. People are much more corporatized,” he adds a little wistfully.

Looking back, he remembers some of the small gestures that allowed him to get where he is. An early mentor, George Stewart, gave him the confidence to take up what would be his life’s work. This is a story Caldwell will mention in his acceptance speech at the IIAC dinner: “It’s self-aggrandizing.

But he saw something in me. He told me, ‘You’re going to be something here.’ It was simply as way of encouragement. But I was just a boy; this was not faint praise to me. That one comment stayed with me the rest of my life. That really had an effect. I would think of that whenever times were tough. It gave me confidence. That one comment was one of the reasons I did what I did.” Today, Caldwell makes a point of talking to the interns that come through the office.

BRANCHING OUT An early foray in his career saw Caldwell head to New York City with Merrill Lynch for a couple of years. His well-known pride in Canada was already forming. Asked if he was impressed with the titans of Wall Street at the time, he says, “Not particularly.

Americans can often be quite inward-looking, provincial. I think Canadians have a worldlier outlook.”

Caldwell returned to Bay Street in the mid-1970s.

“THIS – WH

By this time, he had moved on to another firm, Burns Fry, headed by the infamous Jack Lawrence. But Caldwell also had an idea for a firm. The institutional bond firms may have been the heart of the Street at the time, but things were already changing. There was a growing hunger for stocks among the retail crowd.

Caldwell had an idea: create a firm that would cater to high-net-wealth Canadians looking to invest. “I wanted to do an investment agency without the brokers. I wanted to create this structure. I saw my father running his own business. I wanted to do the same.”

He was 37. His high-school sweetheart, now his wife of more than 40 years, would mortgage and re-mortgage the house to help keep the firm alive.

(At the induction ceremony, Caldwell will tell the crowd that the person in the room full of Bay Street legends who had taken the biggest risk was his wife.)

Eventually, in 1981, he bought a seat on the Toronto Stock Exchange. Thomas Caldwell Partners Ltd. was born. He would have to tell Jack Lawrence he was leaving the firm.

When Caldwell had started at Burns Fry, he had been cocky enough to say that he was only going to be there five years before he started his own firm.

Almost five years to that day, he went back to Lawrence and told him he was setting out on his own. “I said, ‘Hey, I’m waiting for approval for a seat on the TSX. But I want to stay here until I get it. If I don’t, I want to stay here. Oh, and if I screw up, I want to come back,’” says Caldwell, laughing. “They said yes!

That wouldn’t happen today. No way. Jack Lawrence was so mad – he went crazy on me. Of course, I told him this is exactly what he would have done … and we laughed some more.”

Since then, Caldwell Securities has expanded to become one of the great independent names on Bay Street. Today, there is Caldwell Investment Management Ltd., a registered portfolio manager and investment fund manager in Ontario, British Columbia, Alberta and Saskatchewan. Caldwell Financial Ltd., the holding company, is 100% owned by employees, and operates a network of financial advisor offices across Canada. Caldwell considers himself an advisor and a money manager. He still oversees a large $180 million fund that he invests on his market ideas.

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WPA

“A NEW ADVISOR WILL BE “IT’S IMPORTANT TO TREAT IT “IT’S BEEN ONE TERRIFIC RIDE

WISE TO FOCUS NOT LIKE A JOB.” AND FOR ME TO BE RECOGNISED ON UNDERSTANDING “This win has created LIKE A BUSINESS,

EVOLVING GUIDELINES” a great deal of “THIS BUSINESS IS BASED ON RELATIONSHIPS – WHAT GOES AROUND COMES AROUND.”

excitement within the company”

FOR IT IS FANTASTIC.”

“IT’S REALLY A RELATIONSHIP

“WPA WINNERS “IT FEELS AMAZING TO HAVE INDUSTRY.” “THE COMMUNITY SERVICE FILLS MY HEART”

DEFY ROUGH AFFIRMATION OF on the money. you work hard the MARKET” WHAT WE DO.” Ifmoney will come.”

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“BEHIND EVERY GREAT SUCCESS IS A GREAT TEAM.”

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“I HOPE I HAVE CONTRIBUTED KNOWLEDGE,

INFORMATION,

PHENOMENAL TEAM THIS WOULD THINGS IN MY LIFE.” “I COULDN’T IMAGINE NOT BE POSSIBLE.” “THIS IS SUCH AN WINNING TWO BETTER AWARDS.”

EDUCATION; I’VE DONE SO MANY

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for the Wealth Professional Awards

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INDUSTRY ICON / THOMAS CALDWELL

There is also Caldwell Insurance and the closed-end investment vehicle Urbana Corp., which hasn’t been as successful as many hoped. But Caldwell’s son Theo is in charge of wealth management in the U.S., working out of New York City. His oldest son, Brendan, is a key executive at Caldwell in Toronto, and so he’s been able to meld work and home into one successful operation.

“You have to know history, geopolitics. You have to work all these things in” CULTIVATING KNOWLEDGE Over the years, Caldwell also carved out a reputation as someone knowledgeable about stock exchanges as an investment. He bought that first Toronto Exchange seat for $30,000 in 1980. In 2002, the seat was only worth $50,000.

But then something funny happened. The value of stock exchanges boomed. The Toronto Stock Exchange would de-mutualize. Just a few years on, the $30,000 investment turned into an almost $28 million holding. Purchasing not-for-profit exchanges just before they converted to profit-making institutions turned out to be a great idea. By the time the New York Stock Exchange de-mutualized, Caldwell owned almost a quarter of the seats. “I bought the first one at $2 million. Dick Grasso, then the head of the NYSE, called and thanked me for setting a new record price.

And then price dropped to $1 million. My partners wanted to kill me,” Caldwell says, laughing again. He held on, as a good Bay Street legend should. “Eventually we sold them for $9 million each.”

Caldwell is a classic old-school, activist trader. He generates his own trading ideas. He is not afraid of taking risks. Today he has shifted much of the fund he runs into U.S.-based investments, catching the recent run-up in the U.S. dollar, which has helped return. “That’s been nice,” he says.

At one point, he gets up to grab the performance data on one of the funds he runs and rattles off a performance record that works out to 12% in real return annually going back a decade. “Not every year is a gain. Some years there are losses,” he says. “But some years it’s been up 20%. Over time, I am going to beat the market.” In a world when passive, index-based investing is all the rage, the brash confi-

dence seems to be out of sync with the conventional wisdom.

The supporters of index investing will point to study after study showing that a large chunk of managers fail to beat the index most of the time, which may be true. But there are also a lot of managers who do manage to beat the index, consistently.

And there is a reason for that. For someone like Caldwell, the duty is to spend all day thinking about markets, following the story, working in the historical and geopolitical considerations, working in corporate information, to make the kind of informed decisions that allow the sophisticated investor to get in from the market and generate returns above and beyond the index. This is the reason Caldwell got into this business.

“You have to know history, geopolitics. You have to work all these things in,” he says. “I have been doing that all my life. I have partners I can bounce things off of. But you have to have a view of where things are going.” Markets, of course, are giant information processing machines. To do well, you have to develop a view of the world. Sure, he may seem out-of-sync with the flavour of the day. But because this is what he does all day, has been doing all his life, Caldwell has never lost that confidence, that, at the end of the day, he will beat that retail investor trading on their own account in the basement after work.

If you can only spend some of your days keeping up on markets, if you come home and read a few articles on the internet at night before making some bets through a discount broker, you are at an informational disadvantage. You’re the bait for the guys who do it full time, all day, over decades. “These guys in the basement investing over the internet…I love them,” Caldwell says. “You might beat me a couple times, but I’m coming for you. That guy sitting in his basement ... you don’t have a chance. Over the longterm, I’m always going to beat you.”

He’s been around long enough know the trends come and go. The intellectual preciousness is now on full display. What does it mean, he muses, that the vast mass of the herd has moved into index funds and is no longer following fundamentals? “Stocks move now because of weightings they have in indexes.

No one is investing in companies … I don’t know how.

I don’t know what it will be … I’m not sure yet how it’s going to play out. But I bet the next big controversy on the Street is going to be around ETFs and notational derivatives.”

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BLAZING A TRAIL Caldwell never stops thinking – that’s clear. He’s never been shy about speaking out, either, which is refreshing in an age when so many corporate elites seem frightened to say anything at all. One thing Caldwell has never shied away from talking about is his Christian faith, which is part of who he is as a financial advisor. “All our institutions come from the religion. Hospitals, universities … these all come from the church,” he says. “As humans, we need an operating system. Something to remind us what is right when life gets confusing.”

Caldwell will later hand over one of the many small booklets with Bibles printed in them that he keeps in his pocket. Each book has a toonie taped to it. “I give them enough for something to eat, but something more. I know them all,” he says of the homeless around the office. Sure, Bay Street can sometimes seem a great and gilded palace. But it is a rough and tumble place psychologically for those in the trenches. “I know nine people that have taken their own life,” says Caldwell.

Some of those were at his firm.

He tells a story about what it means to be a real advisor. Decades ago, pulling up to the house of a wealthy, eminent Canadian client, he took him out for a drive in his new to car – and then drove him straight to Renascent House in Toronto, an alcohol treatment centre. Twenty-five years later, that client likes to remind Caldwell, “I’d be dead if it wasn’t for you.”

Caldwell is not afraid to talk about the importance of doing work that instills meaning in life, or of wealth management as a vocation. “I don’t have to know if ... but I want to think that I did make a difference,” he says. The candour is refreshing. It is the mark of someone not going through life playing a role by rote – he is engaged.

WORLD VIEW Famously, in the 1990s and 2000s, Caldwell took out full-page ads in the Globe and Mail pronouncing on issues he thought important. He lists some of the issues – the over-regulated nature of markets; the dearth of new, young companies that will provide the next round of economic growth.

Today, Caldwell worries about a geopolitical situation that is spinning out of control on the other side of the globe. Decades after the guys who built Bay Street came back from the Second World War, the mighty, sophisticated and complex economy has come to be. Today, the Street is home to many well-balanced, well-trained, well-hydrated financial

“Stocks move now because of weightings they have in indexes.

No one is investing in companies...” types, toiling away at the big banks, tending the index funds and ETF accounts. The legions of bland corporatized types today have only ever lived through the post-war boom era, an age of radical economic wealth, complexity and sophistication. This is all most know today. Few today question the constant growth and assume it will all go on forever, that the economy will always unfold to ever greater levels of wealth and impressiveness.

But Caldwell has an experience that links back through the cycles. He understands the shape of history. He knows it’s not always in one direction.

Asked if he thinks this culture has entered a worrying age, something like the 1930s, he is quick to answer.

“Absolutely,” he says. He goes on. “I call this the Age of Entitlement. People feel they are owed something.

Everyone seems to think they are entitled to this stuff, this way of life. But that’s not it. This is not the case.”

He is famously supportive of the Canadian Forces.

The many books on military history and art around the office are not just for show. Caldwell was named Honouray Lieutenant Colonel of the Lincoln and Well and Regiment. He has travelled to Afghanistan to meet the troops. He is also on the Conference of Defence Associations [CDA], a board that sees NSA and American military officers to come north and discuss issues. He’s not worried about Putin. “They could have rolled right across if they wanted,” he says. It’s ISIS that worries him. “I have been the director of a Saudi bank. I know Shia and Sunni. I think the comparisons to this era and the 1930s are apt. We are at war with ISIS. We will lose. We’re resting ... while the caliphate is fighting. I think we need to talk about these things.”

A couple weeks later, Canada’s CF-18s will head to Kuwait to take part in the fight against ISIS. Caldwell will be one who believes this must be done if the western way of life is to be defended. It is a deep and abiding message from someone who has been part of the story, on the Street, longer than many have been alive.

IIAC HALL OF FAME 2014 INDUCTEES Thomas Caldwell, C.M. Founder and Chairman, Caldwell Securities Ltd. Thomas Kierans, O.C. Former President, McLeod Young Weir Ltd. Michael Tims Former Chairman, Peters & Co. Honourable Michael Wilson, P.C., C.C. Chairman, Barclays Capital Canada Inc. Former Ambassador of Canada to the United States Former Federal Finance Minister POSTHUMOUS INDUCTEES Charles Gundy 1905 – 1978 Former President and Chairman, Wood Gundy Ltd. Deane Nesbitt 1910 – 1978 Former President and Chief Executive Officer, Nesbitt Thomson & Co. Lieutenant Colonel Jean Ostiguy, O.C., Legion of Honour, C.D. 1922 – 2012 Co-founder, Morgan, Ostiguy & Hudon Ltd.

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BUSINESS STRATEGY / LEADERSHIP

DRIVING CHANGE: when to involve the troops Leadership is always a delicate balance, and knowing when to involve your staff in an important initiative is just one of these balancing acts – and the timing needs to be just right. In this extract from his book, Leadership: It’s a Marathon, Not a Sprint, Gordon Tredgold shares the perfect time to bring in support When you’re fighting a battle, how long do you have to fight it alone? What’s a duel, and what’s a war?

When should you call for reinforcements? When can you expect to find an army at your back? Someone asked me the question: At what point do we need to involve more people – like experts – when we’re shooting for those big goals?

This is an interesting and difficult question to answer. I see it as a very tough balancing act that we have to get right. If you involve too many people too early, then your goals run the risk of becoming tempered and watered down. On the other hand,

if you involve too few people or involve them too late, people might feel excluded and this can then lead to resistance, tension and lack of commitment.

That can be a huge source of conflict. In my opinion, the team defining the objectives and the goals needs to be small. And by small, I mean perhaps one to two people.

I’ll explain why I’m so conservative with that number. The more people you have involved in defining the goal, the more reasons they’ll provide you as to why you cannot hit your target. (It’s more ‘natural’ to think initially of what could go wrong.

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WEALTHPROFESSIONAL.CA

If you involve too many people too early, then your goals run the risk of becoming tempered and watered down. On the other hand, if you involve too few people or involve them too late, people might feel excluded, and this can then lead to resistance, tension and lack of commitment

If I had consulted with a larger group, I am sure we would have tempered the goal and probably set it at 60%; 80% wouldn’t have even been considered, much less reached.

In my opinion, keep the team to a minimum when you’re at the first step of defining success and setting the goals for a change.

So then, the second step. You have to define the why behind the what: why this goal is important, what the benefits are, the reasons behind it and so forth. The more inspirational the goal, the more convincing your why – and the bigger the buy-in.

This is when more people begin to show up.

As soon as what and why have been defined, you can begin gathering an army to tackle how.

Remember this: The goal is non-negotiable now.

There will be those who will try to deter you from it. There will be those who won’t be able to fathom the big picture. But the team’s focus should be on brainstorming and mapping out the road to success.

The vision of success has already been taken care of. All the energy must now be channelled to discovering how to achieve the bold goals – not how to temper or reset them.

The three key principles to driving change are: Remember when someone turned up late for a date or a meeting? A dozen bad scenarios probably ran through your head – from he doesn’t like me anymore to maybe he got into a car crash. Turned out, he’d just stopped to fill up with petrol.) If there are too many people involved, your goal will be watered down from big, bold and beautiful to small and not-so-impressive. It’s nobody’s fault, per se; it’s just the way of people, for there are as many opinions as there are voices. In the end, it’s your decision, and your voice has to make the choice.

We need to be dedicated and fearless when setting big and ambitious goals, and this is more easily done if we only have to deal with (or convince) a small group. Large groups tend to be more cautious, argumentative and often lean toward the safe side – not what you need when setting big, bold goals. You need healthy doses of risk, ambition and creativity, and those characteristics can get trampled by the masses.

I’ve experienced this in the workplace time and time again, like that time when I set one company’s goal for an on-time delivery increase to 80% (as compared to our old average performance of 35%).

• Define the problem (the goal) with as few people as possible • Create an important and inspiring reason that people can buy into • Define the solution (the strategy for success while involving and welcoming more people – the troops) There will always be some resistance, of course.

You need to see beyond that now. The Chinese have a popular proverb: It is better to light the candle than to curse the darkness.

Problems exist to be solved. Your vision must be powerful enough, and your focus must be just as keen. Don’t ask your team: Why shouldn’t we do this? Instead, ask your team: Tell me what you need to make this happen. If you can attain the balance, your larger group will not feel excluded. Instead, those people will feel involved. They will take up the challenge and work with you to define the solution. After all, the resulting solution will be their brainchild, too, and involvement breeds commitment. Thus do we set big, bold, challenging goals, while inspiring people and ensuring their commitment.

Leadership: It’s a Marathon, Not a Sprint – Everything You Need to Know about Sustainable Achievement is available for purchase on Amazon, Barnes & Noble, and iTunes

Gordon Tredgold is a specialist in transformational leadership, operational performance improvement, organizational development, creating business value, and program and change management. He has global experience gained from time living and working in the U.K., Belgium, Holland, Czech Republic, the U.S. and now Germany.

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BUSINESS STRATEGY / MARKETING

MAKING MOVIES: 10 things to avoid when making a video for your business Video can be a great way to engage with potential and current customers, and these days it costs very little. Video expert Geoff Anderson points out some common mistakes to avoid Video is one of the most powerful and accessible tools we have in business today. When it is done well, it builds community, creates rapport and enhances your brand.

However, when it is done poorly, it can turn away followers and customers and create brand damage.

Here are 10 mistakes to avoid when making videos for your business:

1

NO CLEAR AUDIENCE

As with any marketing activity, it is critical to be clear on who your audience is. Don’t try to be everything to all people. If you do this, your message will get lost and have little meaning.

By being clear on your audience, you can target your message in a way that truly resonates. If you struggle with your target audience, think about who you would like to sign as a client after seeing the video.

If you have a niche for your firm, then be clear about it.

2

AN UNFOCUSED MESSAGE

The clearer you can be about why you are making the video, the easier it will be to focus your message. What is the action or message you want the viewer to take away after watching your video? Keep coming back to this as you draft your scripts, and think – is this relevant or helpful for my intended audience?

TOO MUCH INFORMATION The days when an audience would indulge 10 or 15 minutes to watch your video have passed. The key now is to keep the content concise and valuable, which goes back to the purpose of your video.

For example, if the purpose is to encourage people to visit your booth at an event or call you to discuss their financial planning needs, then find ways to get to that point quickly and clearly.

Sometimes too much information ends up turning people away, or worse – boring them.

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FACTS INSTEAD OF EMOTION You may be offering the best service or the lowest fees, but how can you make this information resonate with your audience? Does it mean they can have less stress about their financial position? Focus on the emotional needs of your audience and how you can satisfy them.

Keep asking yourself – why does this feature matter to my customer? You can connect with people at an emotional level when you focus on how they will feel and benefit as a result of using your services.

Leave the weighty details on your website for those who really need to know.

TOO MUCH EMPHASIS ON YOU Keep the focus of your video on the viewer and how your work can help them rather than focusing on yourself. If you find yourself talking about we and I, stop and think about how you can shift it to “how you will benefit from these services.”

If you focus more on what’s important for your customer, you are more likely to keep them engaged.

POOR AUDIO Viewers will put up with rough visuals, but they won’t forgive poor sound. No matter what camera you are using, make sure you connect a suitable microphone to it. Ideally you want to have a camera that allows you to monitor the sound as it is being recorded. That way you can check if there are any rubbing noises or buzzing that could affect the quality of the audio. If you can’t plug in headphones while you record, then do a test recording first and listen back to check the quality.

Even if you are shooting on a smartphone, there are plenty of microphones you can get to ensure the audio sounds right. These include shotgun, lapel or handheld microphones.

BADLY FRAMED When filming people, make sure you put the top of the person’s head at the top of the frame. Many newbies look through the camera and put the face in the middle of the screen. This results in empty space above the person’s head. Learn to look through the

viewfinder as if it is a framed picture on the wall.

Generally, if someone is talking directly to camera, make sure they are centred in the frame. The only time you might play with this is if you want to use the space on the side to add extra information such as text points.

If you are interviewing someone on camera, ensure you give a little space for ‘talking room.’

If you are using your smartphone for filming, then make sure you hold the camera in landscape mode. If you shoot in portrait aspect, you will end up with a thin image with black bars on either side.

Also avoid using the zoom; this will just reduce the quality of the recording – instead, stand closer to your subject to fill the frame.

UNINTERESTING OR DISTRACTING BACKGROUND Be aware of what is in the background of the shot, as this will form part of the story you are telling. Avoid filming people up against walls, as it will create shadows and look uninteresting and flat. The more depth you can have in the picture, the better, and a background provides an opportunity to show some additional information that can enhance the character of the presenter or the information you are sharing.

WOBBLY CAM A tripod is a must for newbies to avoid shaking hands and wobbly video. You can even get holders for mobile phones that will ensure your shot is steady.

Unexplained camera movement distracts the viewer and dilutes the impact of your message.

USING CHEAP TECHNOLOGY TO IMPRESS Cheap and easily accessible devices such as mobile phones are a way to stay connected with your community.

However, I wouldn’t recommend trying anything too tricky or impressive using a phone camera, such as a promotional video or green screen effects. Better quality lenses, image sensors and audio will give you a better result for that sort of stuff – in which case, talk to the professionals.

Keep the do-it-yourself content for maintaining rapport with existing customers. If you are looking to use video to attract new customers, then spend the time and money to work with professionals.

Geoff Anderson is a video producer and owner of Sonic Sight.

He presents on using video in business and is the author of the Amazon bestseller Shoot Me Now: Making Videos to Boost Business.

Visit www.sonicsight. com.au.

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TEN QUESTIONS / KRISTA KERR

10 QUESTIONS FOR KRISTA KERR

Back in the 1970s, Krista Kerr’s father realized there was a new industry opening up around personal financial advisory services. He took his knowledge of taxes and estate management, left the big firm, and became an early personal financial advisor. Since then, Kerr Financial has generated an extremely solid reputation that Krista carries on today. Between her duties as the firm’s CEO, the editor of The Only Retirement Guide You’ll Ever Need and a member of the boards of the National Ballet of Canada, she took a few minutes to answer Ten Questions.

1 What do you love about the industry?

I love that the work is constantly challenging and that this knowledge is used in a personal way to help clients optimize their family success.

2 What are you concerns about the industry?

More and more people are entering the family office and high net worth space, and I am not sure that all of them understand the depth of knowledge required to really serve this client segment well.

3 What kind of client do you love?

The ideal client is looking for a partner to help them manage all their family’s financial needs. They have a complex situation that benefits from good tax planning. They have a level of assets that benefit from a best-of-class, multi-manager investment approach. They also have the desire to sustain family wealth.

connect with charities or as executive director of a charitable organization.

6 What is your favourite thing to do outside the office?

Other than taking my dog out to play in the local dog park, my favorite thing is to enjoy enriching cultural experiences. I love getting lost in an amazing dance or theater performance or in a beautiful piece of visual art.

7 What is the one time you really went out

of your way to help a client?

One day years ago, we had an instance where a financial institution failed to transfer a regular monthly amount to a client’s bank account on time. The client called my father from the grocery store, concerned that they had no funds. My dad cleared his schedule, went to his own bank and withdrew cash, went to the grocery store and paid for the groceries, and then took the client home to help her unpack. It wasn’t enough to have the transfer corrected – which we, of course, worked to do – but my father went out of his way to make things right.

8 What keeps you going?

I am intellectually curious and love to learn new things and use these skills to solve complex problems for clients. I am genuinely interested in people, and I like connecting with clients and taking care of things for them. I am driven to continue our family legacy and carry on the tradition my father started in the 1970s.

4 Is there one client who stands out in your mind?

I think of a few clients who are business owners or senior executives who have had liquidity events and are now focused on stewarding the wealth they have built for the benefit of future generations.

9 What are your own retirement plans?

I think if you love what you are doing, you don’t look forward to a retirement where you stop working. You look forward to doing more of what you love.

5 If you weren’t an advisor, what would you be doing?

Some of my most rewarding experiences have been on boards of charitable organizations. I am not going to magically develop the singing or dancing talent that would allow me to perform for a living, so I would probably pursue a role helping families

10 What’s the best part of the job?

I love drawing on my knowledge and the work of our different departments to create solutions that truly help clients. I love that I have strong personal relationships with clients.

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The hypothetical example does not represent any particular investment. The cost savings reflect a comparison between Vanguard ETFTM fees and average Canadian mutual fund fees. The comparison is based on a 6% annual return, an initial investment of $250,000, an average 2.01% MER for mutual funds and an average 0.22% MER for Vanguard ETFs. The MERs are asset-weighted as of December 31, 2013. Vanguard ETF MERs were sourced from the Management Reports of Fund Performance. The mutual fund industry MERs were sourced from Investor Economics. Without waivers and absorptions, the Vanguard ETF MERs would have been higher. Vanguard Investments Canada Inc. expects to continue absorbing or waiving certain fees indefinitely, but may, in its discretion, discontinue this practice at any time. For more detailed information visit, vanguardcanada. ca. Inflation and other potential costs are also not considered. Investments in the Vanguard ETFs can be made through a financial advisor or on-line brokerage account. Š 2014 Vanguard Investments Canada Inc. All rights reserved.

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