Wealth Professional 4.08

LEARN FROM THE MASTER Michael Lee-Chin on the investment rules that made him a billionaire

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ISSUE 4.08

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CONTENTS

22

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UPFRONT 02 Editorial The fixed-income paradox

04 Head to head Fintech’s threats and opportunities

32 FEATURES

THE RULES OF WEALTH Michael Lee-Chin offers his thoughts on democratizing wealth and the value of holding illiquid assets

40 0

06 Statistics Examining the industry’s gender gap

08 News analysis A closer look at the alarming trend of negative-yielding bonds

10 Intelligence This month’s big movers and shakers

12 ETF update National Bank expands its ETF offerings

14 Alternative investment update The OTPP is cashing out in Vancouver

16 Opinion The benefits of bringing the family office to the masses

COVER STORY

ADVISORS ON FUND PROVIDERS

FEATURES

Find out which fund providers made the grade with advisors nual survey in WP’s annual

FEATURES

PEOPLE

PERSONALITY AND PERFORMANCE

INDUSTRY STRY ICON Pat Dunwoody, oody, president of the Canadian adian ETF Association, on, discusses the very bright right future of ETFs in Canada

1

Understanding your employees’ unique personality traits can help you build a higher-performing team

44 4

38 Balancing data and gut instinct Which one should you rely on when making hiring decisions?

42 Becoming an effective communicator Are you guilty of one (or more) of these conversational mistakes?

PEOPLE 36 Advisor profile How Andrew Oproiu went from living in his car to an AUM of $23 million

47 Career path Bob Roy has built his career by never passing up a good opportunity

48 Other life FEATURES

Casting a line with Thane Stenner

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Follow these three steps for an instant improvement in productivity

CHECK IT OUT ONLINE www.wealthprofessional.ca

1

UPFRONT

EDITORIAL

K_\ e\n Ôo\[ income reality

W

hen it comes to fixed income in 2016, investors cannot really say with any degree of certainty where the winds of change may be taking us. Government bond yields are at record lows, and corporate debt is now moving in the same direction. In the not-too-distant past, the idea of a negative-yielding bond would have been considered illogical, but that’s the reality in 2016. Yet fixed income continues to attract large amounts of investment, an apparent paradox that has many in the wealth management business re-evaluating their investment philosophies.

As a result, Bloomberg’s Canadian Fixed Income Conference, held in September, was not short of talking points. One issue highlighted was increasing regulations right across the board – something that’s a concern throughout the advisory world. Martin Bellefeuille, managing director and head of fixedincome trading at Desjardins Securities, believes many in the industry are still

In the not-too-distant past, the idea of a negative-yielding bond would have been considered illogical, but that’s the reality in 2016

wealthprofessional.ca ISSUE 4.08 EDITORIAL

SALES & MARKETING

News Editor David Keelaghan

National Accounts Manager Dane Taylor

Writers Joe Rosengarten Libby Macdonald

Associate Publisher Trevor Biggs

Executive Editor – Special Features Ryan Smith Copy Editor Clare Alexander

CONTRIBUTORS Sean Harrell Christine Khor Warren Kennaugh Georgia Murch Dermot Crowley

ART & PRODUCTION Design Manager Daniel Williams Designer Kat Vargas Production Manager Alicia Salvati

General Manager, Sales John Mackenzie Project Coordinator Jessica Duce

CORPORATE President & CEO Tim Duce Office/Traffic Manager Marni Parker Events and Conference Manager Chris Davis Chief Information Officer Colin Chan Human Resources Manager Julia Bookallil Global COO George Walmsley Global CEO Mike Shipley

Traffic Manager Kay Valdez

EDITORIAL INQUIRIES david.keelaghan@kmimedia.ca

SUBSCRIPTION INQUIRIES

in the dark regarding the specifics of the new regulations. “We’re bombarded with all these rules changes, and we need to evolve and adapt,” he said. “There are some questions that, I’ll say candidly, we don’t have answers to. And as a dealer, we have to know what the costs of these changes are.”

Also discussed at the conference was the need for Canada’s economy to diversify and move away from its energy dependence. On that issue, National Bank of Canada CEO Louis Vachon called on the nation’s businesses to step up to the plate. “We are a well diversified economy, and it’s high time for other sectors, like services and manufacturing, to come back and play a bigger role in economic development.”

While Canada’s economy continues to splutter along, the TSX is having a great year, increasing 12% since January’s lows. Stocks, therefore, are currently on the expensive side, which means many investors are pursuing other avenues.

Speaking at the Bloomberg conference, Bruce Anderson, Manulife Financial’s managing director of project finance and infrastructure, described how the federal government’s infrastructure spending plan was having the effect of pushing forward other private projects. Considering that infrastructure finance is worth more than $1 billion annually in Canada, it’s certainly another option in what is currently a challenging investment environment.

The team at Wealth Professional

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Commissions, management fees and expenses may all be associated with investments in mutual funds and exchange-traded funds (ETFs). Trailing commissions may be associated with investments in mutual funds. Mutual funds and ETFs are not guaranteed, their values change frequently and past performance may not be repeated. There are risks involved with investing in ETFs and mutual funds. Please read the prospectus before investing. Copies are available from your advisor or Invesco Canada Ltd. S&P®, S&P 500® and S&P 500 Low Volatility Index® are registered trademarks of Standard & Poor’s Financial Services LLC and have been licensed for use by S&P Dow Jones Indices LLC and sublicensed for certain purposes by Invesco Canada Ltd. TSX is a trademark of TSX Inc. (“TSX”) and has been licensed for use by S&P Dow Jones Indices LLC and Invesco Canada Ltd. The S&P/TSX Composite Low Volatility Index and S&P 500 Low Volatility (CAD Hedged) Index are products of S&P Dow Jones Indices LLC, and have been licensed for use by Invesco Canada Ltd. Invesco Canada Ltd.’s PowerShares Index ETFs are not sponsored, endorsed, sold or promoted by S&P Dow Jones Indices LLC, its affiliates or TSX, and none of such parties make any representation regarding the advisability of investing in such product.

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Invesco is a registered business name of Invesco Canada Ltd. Invesco® and all associated trademarks are trademarks of Invesco Holding Company Limited, used under licence. PowerShares®, Leading the Intelligent ETF Revolution® and all associated trademarks are trademarks of Invesco PowerShares Capital Management LLC (Invesco PowerShares), used under licence. Trimark®, Knowing pays® and all associated trademarks are trademarks of Invesco Canada Ltd. © Invesco Canada Ltd., 2016

UPFRONT

HEAD TO HEAD

How has the rise of Fintech X]]\Zk\[ pfli Ôid6 Technology leveraged to maximize efficiency has transformed much of the business world – financial services included

Andrew Moor

Jos Schmitt

George Aguiar

President and CEO Equitable Bank

President and CEO NEO Exchange

President and CEO GP Wealth Management Corporation

“Disruption is everywhere in the financial world. Driven by regulatory change and client demand, retail assets are migrating at an accelerating pace toward feebased accounts where actively managed mutual funds are underrepresented.

We’ve listened to investment advisors and led a Fintech revolution of our own with NEO Connect, the first – and still only – fund technology platform that enables actively managed mutual funds to be purchased and redeemed just like ETFs, with lower costs for fund manufacturers, higher efficiency and lower MERs for investment advisors. It’s a game-changer that will influence how the industry thinks and acts in the future.”

“While banking and payment systems are the low-hanging fruit for disruptors, the question on the wealth management side is whether robo-advising will displace the financial advisor based on the current cost of advice. Further, is the robo-advisor platform an appealing enough option for investors to abandon their traditional advisor relationship?

The advantage we have is that we have a real business with real clients paying for advice. But we need to embrace technology to provide advisors and their clients with different tools to deliver advice.

A robo-advising platform can complement the advisor-client relationship and provide investors with a choice.”

“We look at the rise of Fintech as an opportunity to rethink banking and challenge the status quo in our industry. Equitable Bank was able to successfully launch EQ Bank, a completely digital way of banking, earlier this year.

Our customer growth over the last eight months demonstrates that our online and mobile model is working well and offers a broad group of Canadians another option to reach their savings goals. The rise of Fintech also allows us to be nimble and, unlike most banks, build and partner without the burden of legacy system limitations or cannibalizing existing profit centres.”

SUCCESSFUL ADVISORS ARE TECH-SAVVY ADVISORS According to a recent survey by Fidelity Investments, one in three investors would change advisors if they weren’t using technology to enhance their services. Younger customers in particular expect technology to backstop in-person meetings with their advisors: 40% of Gen X and Gen Y investors surveyed tuned in to their advisor’s social media communications, 53% received text messages from their advisors, and 34% work with advisors who host webcasts. Almost 90% of the high-performing advisors included in the survey reported being engaged users of tech, and just over half reported using technology to facilitate easier communication with clients.

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Putting Advisors

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UPFRONT

STATISTICS

Where are the nfd\e6

The CFA reports that fewer than one in five charterholders are female – yet another sign of the industry’s lingering gender gap DIVERSIFICATION IS a cornerstone of sound investment – but according to a recent report from the Chartered Financial Analyst Institute Research Foundation, it’s a principle that is “remarkably absent from team construction across all spectrums of the investment profession.” Despite the emergence of company culture as a competitive edge and a growing area of interest in the investment industry,

52%

Female respondents who hold a master’s degree; the figure for men was 57.2%

65.9%

Female respondents who said more than half of dependent care responsibilities fall to them

senior leaders at wealth management firms have encountered difficulties in both attracting and retaining female investment professionals.

The CFA’s Institute Research Foundation surveyed more than 5,000 CFA members (roughly 4,000 men and 1,000 women) and was able to assemble some key findings to zero in on this lack of diversity, what causes it and what need to happen to change it.

79%

Female respondents whose spouses have a full-time occupation; the figure for men was 50.7%

56%

Female respondents with no children; the figure for men was 46.8%

WOMEN UNDERREPRESENTED IN INVESTMENT WORLDWIDE Wealth management is still a field dominated by men – in no country do women make up even half of CFA charterholders. The countries with the highest percentages of female CFA members are clustered in East Asia; Latin American countries tend to have the lowest proportion of female CFA members.

Source: Gender Diversity in Investment Management, CFA Institute Research Foundation, 2016

;@M<IJ@KP @E K?< G@G<C@E<6

OPINIONS ON DIVERSITY

While 57% of college graduates and 48% of business majors are now female, only 32% of CFA exam candidates in June 2016 were women. When do women make their career decisions?

Views on diversity split along gender lines in answer to the question: When it comes to the gender diversity of a team of investment professionals, which of the following best describes your view?

Women

Men

<18 years

10.3%

11.8%

18-21 years

39.9%

36.1%

22-25 years

32.8%

32.5%

26-29 years 30+ years

8.9% 8.4%

11.3% 8.4%

Source: Gender Diversity in Investment Management, CFA Institute Research Foundation, 2016

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I believe mixedgender teams lead to better investment performance results because of more diverse viewpoints

I don’t believe mixedgender teams lead to better investment performance results, but I prefer to work for a firm whose corporate culture is supportive of gender diversity

Gender diversity does not matter when it comes to managing investment

Women: 69.5%

Women: 19%

Women: 11.5%

Men: 42.5%

Men: 30.9%

Men: 26.6%

Source: Gender Diversity in Investment Management, CFA Institute Research Foundation, 2016

Percentage of female CFA members 25% to 43% 15% to 24% 10% to 14% 3% to 9% Source: Gender Diversity in Investment Management, CFA Institute Research Foundation, 2016

UNDERREPRESENTATION IN KEY POSITIONS

N?F JLGGFIKJ N?FD6

Women are underrepresented in all the most common CFA member occupations; most notably, only about 10% of people in key leadership positions are female. Even in the job titles that do draw more women, only one in three employees are female.

While most CFA members work in investment management, women are more likely to hold service or support jobs than their male counterparts.

Investment management Support for investment management Finance (but neither of the above categories) None of the above

30.7% 25.1% 28.1% 9.8% 10.2%

11%

14.4% 14.9% 15.1% 17.3% 11.4% 11.6% 13.9%

Women

5.8% 19.6%

5.3% 20.4% 52.3%

CEO

CIO

CFO

Sales Investment Trader Research Portfolio Investment Personal Account Compliance Performance agent strategist analyst manager consultant financial manager analyst/ analyst advisor officer Source: Gender Diversity in Investment Management, CFA Institute Research Foundation, 2016

21.6%

Men

16.2%

58.9%

Source: Gender Diversity in Investment Management, CFA Institute Research Foundation, 2016

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UPFRONT

NEWS ANALYSIS

The new Yfe[ i\Xc`kp As corporate bonds follow sovereign debt into negative territory, the question now is: How low can fixed-income yields go?

THE HUGE growth of negative-yield bonds is a phenomenon without historical precedent. In that respect, it’s extremely difficult to predict what the long-term effects may be, which is causing plenty of consternation in the investment community.

The trend dates back to 2014, when the European Central Bank first cut its deposit rate below zero; the Bank of Japan followed suit in January of this year. Since then, the amount of negative-yield debt has snowballed from US$5.65 trillion at the start of 2016 to more than US$13 trillion today, according to data from Fitch Ratings.

Figures like that are troubling, says Jimmy Jean, senior economist at Desjardins, who explains how something as counter-

When negative-yield debt really started to gather pace this year, government bonds were the primary source. In Japan and the EU, low or negative yields are now typical for sovereign debt – and that goes for both short- and long-term maturities.

“In Japan, yields are in negative territory all the way down to 30-year maturity, and in a number of countries, it goes even further than that,” Jean says. “It’s something that could grow. We have seen a number of private corporations in Europe selling bonds with negative yields, so it’s spreading.

There’s a high share of global bonds in the 10-year sector trading at below 1%, and north of 30% trading in negative territory.

This is unprecedented, and all of the indi-

“This [trend] is unprecedented, and all of the indications show it’s likely to be sustained for a long time” Jimmy Jean, Desjardins intuitive as a negative-yield bond continues to attract such high levels of investment.

“In the bond markets, there is a captive clientele – pension funds that need to match their liabilities, so they are kind of stuck with these bonds,” he says. “There is a certain class of investor out there that really doesn’t have a choice.”

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cations show it’s likely to be sustained for a long time.”

A recent study by Citigroup revealed that Swiss government bonds due in 50 years are now yielding less than zero, while 80% of Japanese and German government bonds have negative yields.

It’s a development that confounds even

experts in the field. Rob Tétrault, a portfolio manager at National Bank Financial, says that what’s happening with the bond markets is hard to fathom.

“Hawkish economists believe you can spur the economy by reducing the incentive to leave money on the sidelines,” he says.

“Now that we have gone to zero basically for interest rates, does that incentive still exist?

It’s something I haven’t seen in my lifetime.”

One reason why investors may find debt with no yield more palatable than they have in the past is the fact that the global economy still hasn’t really found its feet since the financial crisis – but that doesn’t quite explain why volume has increasingly moved that way in 2016.

“What is concerning is the sheer amount of money that is doubling up on debt,” Tétrault says. “Why would anyone want to own these bonds? We are getting to a stage

WHO’S BUYING E<>8K@M<$P@<C; 9FE;J6 Central banks buy treasury bonds for their foreign-exchange reserves and stimulus efforts – as these banks increase their bondbuying, yields continue to plunge Corporate banks buy government bonds in order to meet liquidity requirements enforced by central banks Insurance companies that also manage pension funds must own bonds to match their liabilities Currency speculators will also buy negative-yield bonds to profit from a rising currency

where people will be paying to keep their money in the bank.”

In fact, that’s already the case in Germany – a Bavarian bank made headlines in August after announcing it would

“Back in 2010, I used to meet with bond managers, and I always heard the same thing – interest rates will be going up, so you need to position your portfolio for that,” Tétrault says. “That was six years ago,

“If you have 40% of your assets with zero or negative-yielding fixed income, it becomes very difficult to make decent returns” Rob Tétrault, National Bank Financial levy a negative interest rate on private customers for deposits over €100,000. It’s a new playing field out there, and the rules that governed investments in the past are no longer applicable in many cases. That goes for Europe, of course, but also across the Atlantic.

and we have seen nothing but a consistent decrease in Canadian and US bond yields.”

As a money manager, Tétrault has had to change his strategy for selecting asset classes based on fixed income’s new reality. “The historical portfolio theory says a balanced client should have 40%

of assets as fixed income,” he says. “If you have 40% of your assets with zero or negative-yielding fixed income, plus you have to pay the money manager, it becomes very difficult to make anything decent in terms of returns.”

In this environment, alternatives to fixed income start to look much more attractive to advisors. That could mean increasing exposure to securities, which most money managers seeking diversification are reluctant to do – or more likely, looking at other avenues.

“Some advisors are going 100% equity, so they are creating a situation where a client has a risk tolerance they probably aren’t ready for,” Tétrault says. “We explain to clients that yields are not what they used to be. We look into assets with low beta and low volatility that pay some income – so that may be infrastructure projects or REITs.”

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UPFRONT

INTELLIGENCE CORPORATE ACQUIRER

TARGET

PRODUCTS COMMENTS

Institutional Shareholder Services

iiWisdom

ISS' acquisition of iiWisdom's governance portal will allow investors to easily access proxy information and corporate data online

Milestone Apartments Real Estate Investment Trust

Park 9 Apartments

The REIT has purchased a 275-unit apartment community in Woodstock, Georgia

Distributel Communications

Yak Communications

The sale by Globalive Capital unites two independent telecom companies

PARTNER ONE

PARTNER TWO

COMMENTS

Monarch Wealth Corporation

Ticoon Technology

Ticoon will add expertise to Monarch’s digital platform and fully integrated advisor console

Manulife Financial

Indico Data Solutions

Manulife's Lab of Forward Thinking will use Indico's platform to develop artificial intelligence

`8 :cXi`e^kfe `ekif[lZ\j k_i\\ e\n ]le[j iA Clarington Investments has launched three new funds that are intended to complement investors’ traditional portfolios by giving them the opportunity to gain exposure to nontraditional asset classes and regions. The Forstrong Global Strategist Income Fund is designed to enhance portfolio income generation, the Forstrong Global Strategist Growth Fund seeks to enhance portfolio growth, and the Forstrong Global Strategist Balanced Fund gives investors a stand-alone balanced approach to global investing. The funds will be subadvised by Forstrong Global Asset Management.

I`Z_Xi[jfe >DG XkkiXZk`e^ gc\ekp f] jl`kfij There has been no shortage of bidders as a one of Canada’s largest independent investment managers, Richardson GMP, looks set for sale.

Potential buyers include TD Bank, as well as US financial institutions Wells Fargo and Raymond James Financial, who have all made preliminary bids.

Another possibility is that the two major shareholders of Richardson – its employees and investment dealer GMP Capital – may also make a bid.

The firm currently has $27 billion of assets under management and 900 employees. Market observers have predicted that the sale price could be more than $500 million. Speaking about the transaction, GMP Capital was coy in its response, saying, “The Richardson GMP shareholders’ agreement contains a shareholder liquidity mechanism, which could result in a transaction.”

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E<@ dXb\j Z_Xe^\j kf dlklXc ]le[ c`e\lg NEI Investments has merged its NEI Northwest Enhanced Yield Equity Corporate Class Fund into the NEI Northwest Canadian Dividend Corporate Class Fund. Purchases of, and switches to, shares of the terminating fund were suspended after the close of business on September 9. Following the effective date of the merger, preauthorized payment and automatic withdrawal plans from the terminating fund were re-established with the continuing fund. NEI Investments believes the merger will be beneficial to the shareholders of both funds.

PEOPLE HlX[ilj cXleZ_\j cfn$ mfc \hl`kp dlklXc ]le[j Quadrus Investment Services has launched a new family of low-volatility equity mutual funds. The funds were developed for conservative clients who are reluctant to enter the stock market, as well as for pre-retirees who seek relatively high returns but with lower risks. “These low-volatility funds were designed specifically to help reduce the overall risk of the investor’s portfolio and, in doing so, to provide downside protection while still retaining meaningful upside potential,” said George Turpie, SVP of investment products and wealth management at Quadrus.

EXk`feXc 9Xeb XeefleZ\j e\n <K= gfik]fc`fj National Bank Investments [NBI] has launched two new Meritage Tactical ETF Portfolios.

The Meritage Tactical ETF Portfolios first entered the market in March with an initial offering of three portfolio profiles. Responding to strong demand, NBI has added two portfolios to the shelf: the Meritage Equity Tactical ETF Portfolio and the Meritage Fixed Income Tactical ETF Portfolio. The portfolios invest in ETFs from six different providers, selected on the basis of NBI’s key pillars. While the portfolios originally targeted only Canadian ETF providers, the lineup now includes US-based providers to allow for enhanced diversification.

NAME

LEAVING

JOINING

NEW POSITION

Patrick Bieleny

XALTA Capital Partners

Western Financial Group

President and CEO

Paul G. Haggis

N/A

Pure Industrial Real Estate Trust

Member, board of trustees

Linda Mantia

Royal Bank of Canada

Manulife Financial

Chief operating officer

Stephen Mitchell

Burgundy Asset Management

Foyston, Gordon and Payne

Head of global and international equity

Lana Paton

N/A

Pricewaterhouse Coopers

National tax leader

Tim Throsby

JPMorgan Chase

Barclays

Head, corporate and international division

BXgffi kf kXb\ fm\i Xj :<F Xk Dfie`e^jkXi Major management changes lie ahead for investment research firm Morningstar. The company’s founder and current CEO, Joe Mansueto, will step down to become executive chairman on January 1, continuing in his role as chairman of the board. “As I turn 60, I’m ready to transition to an executive chairman role,” Mansueto said.

“I love the company as much as I did when I started it in 1984 and am just as excited by our prospects as ever.”

Taking the helm as the new CEO will be the firm’s current president, Kunal Kapoor. “I can’t think of a better person than Kunal to lead Morningstar,” said Mansueto, who described his future successor as a Morningstar veteran with experience in nearly every facet of the company’s operation, including research, data and software products, and investment management.

9cfl`e af`ej EXk`feXc 9Xeb YfXi[ f] [`i\Zkfij DXZb\eq`\ \ogXe[j jdXik Y\kX gif[lZkj Mackenzie Financial Corporation has broadened its suite of smart beta investment offerings with three new ETFs and three new mutual funds. The new ETFs and mutual funds are designed to give investors the potential to reduce risk concentration and market bias, as well as improve risk-adjusted returns. The products are offered in partnership with asset manager and index provider TOBAM, which will use its patented and awardwinning methodology to insulate portfolios from structural bias and unmanaged risks that are often found in cap-weighted indices.

National Bank has welcomed Pierre Blouin as the newest member of its board of directors. Blouin also will serve on the firm’s human resources committee. An experienced corporate director, Blouin is also a seasoned executive in the North American IT and telecommunications industry.

From 2005 until 2014, he served as CEO of Manitoba Telecom Services. Before that, he worked for more than 20 years at BCE, notably as president of various subsidiaries, including Bell Mobility and BCE Emergis.

“With Canadian financial institutions today operating in an increasingly complex technological environment, Pierre Blouin’s expertise as a CEO of digital technology companies will be an important asset to National Bank’s board,” said board chairman Jean Houde.

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UPFRONT

ETF UPDATE NEWS BRIEFS National Bank jlYj`[`Xip eliminates ETF transaction fees National Bank Direct Brokerage has announced an industry first: All of its clients will be able to conduct online trades in every Canadian-listed ETF on the TSX without incurring any transaction fees. Although there’s a required minimum of 100 shares per trade, there are no restrictions with respect to account size or number of transactions. National Bank Direct Brokerage claims that this move makes it the first Canadian online brokerage to deliver commission-free trading of every ETF listed in Canada, adding that its objective is to allow all investors, regardless of portfolio size, access to the Canadian ETF market.

Low assets force BlackRock to j_lkk\i (' <K=j BlackRock has decided to close down 10 of its ETFs, even though all posted positive gains over the past year – including an impressive 38%, in the case of the iShares MSCI Emerging Markets Latin America ETF (EEML).

However, the funds, which invest in inflation-linked debt, emerging markets and high-yield bonds, haven’t been overwhelmingly popular with investors.

The 10 funds have only been able to accumulate about $30 million each, which, according to a BlackRock money manager, isn’t enough to justify keeping them going.

New GICS ZXk\^fip k_ifnj iShares ETF a Zlim\YXcc The creation of a new real estate sector under the Global Industry Classification Standard [GICS] on August 31 could cause a shakeup in an index tracking Canada’s biggest stocks – and, consequently, the country’s biggest

12

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ETF. According to a Bloomberg report, the new classification may result in companies such as Bombardier and BlackBerry being ousted from the S&P/ TSX 60 index to make room for real estate entities. Should that happen, the iShares S&P/TSX 60 Index ETF, which is currently Canada’s largest ETF with a market capitalization of $12.7 billion, would also be affected.

First Asset XeefleZ\j e\n XZk`m\cp dXeX^\[ Yfe[ <K= First Asset Management has launched the First Asset Investment Grade Bond ETF on the TSX under the symbol FIG. The ETF was converted from a mutual fund, the Marret Investment Grade Bond Fund, on the approval of unitholders at a special meeting held on May 18. Marret Asset Management, which provided portfolio management services to the original mutual fund, will continue to provide portfolio management services to the ETF; Paul Sandhu, vice-president and portfolio manager at Marret, will continue as lead portfolio manager.

BlackRock’s China ETF recovers as [`jZflek eXiifnj Things are stabilizing for the world’s largest ETF invested in Chinese Mainland shares. BlackRock’s iShares FTSE A50 China Index ETF has recovered most of the 22% loss it suffered in 2016’s first six weeks and is now down less than 3%. The shares are trading at an improved discount of 5.5% to the fund’s net asset value, down from more than 16% a year ago.

That, in turn, has helped slow a deluge of outflows from the ETF, which began in November 2014 when China loosened restrictions on foreign ownership of so-called A shares, and the fund’s total assets plunged by two-thirds from an early 2015 peak.

Glkk`e^ faith in ETFs Following a successful introduction to the ETF business in March, National Bank Investments has added two more ETF-only portfolios Having just entered the ETF business earlier this year, National Bank Investments recently expanded its reach with the launch of two more ETF portfolios. NBI’s Meritage Tactical ETF Portfolios offer investors products from six different providers across the US and Canada.

Joe Nakhle, general manager of investment solutions at NBI, explains why the firm that was previously dedicated to mutual funds has decided to specialize in this area.

“Meritage started 10 years ago, picking the best mutual funds and building portfolios for advisors,” he says. “We had great success and built over $3 billion in assets, but as the market changed and advisors became more conscious about fees, that’s how Meritage ETF Portfolios came about.”

The original three ETF portfolios launched in March – moderate, balanced and growth – proved such a success that adding two more was somewhat of a no-brainer. The fixed-income and equity portfolios therefore are designed to give advisors interested in ETFs a full investment spectrum. According to Nakhle, the reason Meritage Tactical has proven such a success comes down to NBI’s attention to detail.

“If you look at the number of ETFs that have been launched and the number of providers, it’s astounding,” he says. “The

Q&A

research we do in-house – we screen thousands of ETFs both here in Canada and the US. We do the work for advisors so they have peace of mind that there is due diligence and governance behind our portfolios.”

“We do the work for advisors so they have peace of mind” Meritage Tactical ETF Portfolios are constructed with the input of several teams of experts and are meant to act as diversified, low-cost investment vehicles. The portfolios are rebalanced according to the experts’ tactical views, Nakhle explains. “Across the five portfolios, we have a tactical overlay; we have the option to tilt the asset class mix according to our views, but also to hedge or not hedge some of the FX exposure in the underlying ETFs.” The six providers that NBI has selected for its ETF portfolios – Vanguard, BlackRock, BMO, TD Bank, Schwab and Powershares – are the industry’s leaders and another reason why the firm is confident this year’s growth is just the start of something big.

“We are very happy with the evolution of this,” Nakhle says. “It’s definitely a value proposition that makes sense for advisors.

Given the research and governance we provide, and the fact that we can combine US and Canada with the FX and tactical overlay, we think that’s compelling for advisors and investors.”

Deborah Fuhr Managing partner ETFGI

Years in the industry 19 Why she loves ETFs “For me, an ETF is the only product that is democratic. Every investor, whether you with are a hedge fund, pension fund, mutual fund, a financial advisor in retail – you have access to the same toolbox at the same annual cost with the same minimum investment size. There is no other investment product like that”

Global ETFs jkife^\i than ever What is the history of the ETFGI, and why was it formed?

Basically the idea was that there was a real need for independent research and consulting on ETFs. That’s understanding indices, the providers, how to trade ETFs. So we provide research on the products, trends and flows to the investors. Nobody else does it on a global basis like we do.

I started writing about ETFs in 1997 when there were 21 products and $8 billion, and since then, I have been to 58 countries talking about them. In my heart, I really believe these are useful products to financial advisors as well as institutions, and I think it’s useful to provide research so people so they know there is an alternative to look at.

Global ETFs reached a new record high of US$3.34 trillion this summer. Where is most of this growth coming from?

On a relative basis, Canada has had significant growth this year. We have seen a lot of new issuers and new products. More investors are using ETFs, and more asset classes and benchmarks are being covered. The move to smart beta is something that has been attractive to investors who are disappointed with the returns from market cap. Also, investors are increasingly using ETFs to get exposure to fixed income.

Canada has been slow to fully embrace ETFs. Do you think that’s a generational divide?

Millennials do like ETFs, but so do people who are getting close to retirement. Increasingly, people are finding that it’s difficult to find active mutual funds that are delivering alpha. They might deliver alpha if they didn’t charge such high fees, so increasingly the discussion about returns has resonated with investors that are both young and older. Also, Vanguard going to Canada has made a big difference, as well as the banks introducing robo-advisors.

Robo-advisors are being used as a way for people to do their homework before they speak to a financial advisor.

Apart from the major economies, are ETFs starting to take hold in other countries?

ETFs are a useful tool to gain exposure to markets that people don’t follow day-to-day. For many people, when they want to invest in Japan, they do it through an ETF. China is another market where ETFs are becoming popular. If you believe China is moving to a consumer-driven economy, then you can use ETFs to invest in particular sectors. China, Taiwan, India, Korea – all the markets where otherwise you need to have foreign investor status, ETFs make it much easier.

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13

UPFRONT

ALTERNATIVE INVESTMENT UPDATE

OTPP searches for Ylp\i `e MXeZflm\i The Ontario Teachers’ Pension Plan hopes to raise $2 billion by selling commercial properties

Coopers Place; and The Station, a historic property built in 1912 that is North America’s largest transport hub.

Some of the country’s biggest retail assets are also part of the sale, including the Pacific Centre, a 1.6 million-square-foot downtown retail complex that Cadillac Fairview submitted a proposal to expand earlier this year. Avison Young pegs it as the third most profitable shopping mall in Canada.

The pension plan is keen to sell now that vacancy rates have been driven up by increased supply

The Ontario Teachers’ Pension Plan is selling a minority stake of its real estate portfolio in Vancouver, which is worth around $4 billion.

Cadillac Fairview, the real-estate unit of Canada’s third-biggest pension fund, hopes to raise about $2 billion from the sale. The properties in question are located primarily in downtown Vancouver and Richmond and are made up of office towers, historic buildings and shopping malls.

Experts believe the OTPP is keen to sell

NEWS BRIEFS

now that vacancy rates have been driven up by increased supply. Despite this, prices remain at record levels. Already, Ivanhoe Cambridge and the Healthcare of Ontario Pension Plan are seeking about $800 million for their office towers in Burnaby, BC, just outside of Vancouver.

The Cadillac Fairview portfolio includes such prime real estate locations as the Waterfront Centre, a 21-storey tower on the harbour; the 238,000-square-foot Pricewaterhouse

8`i :XeX[X gcXee`e^ Yfe[ i\[\dgk`fej kf i\[lZ\ [\Yk As part of a plan to trim its key cost ratio by around 21% by 2018, Air Canada has announced plans to redeem US$700 million worth of US dollar first- and second-lien bonds maturing in 2019 and 2020, along with $300 million worth of Canadian dollar bonds maturing in 2019.

The airline, which has been pressured by increased capacity on US airlines, reported $6.4 billion worth of long-term debt and finance leases for the second quarter of 2016. Air Canada also plans to refinance its existing senior secured credit facility.

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The centre also contains eight office towers comprising 2 million square feet.

It’s been a profitable few years for Cadillac Fairview, as its real estate holdings increased 13% in 2015 compared to the previous year, to $24.9 billion. And this year appears an opportune time to sell some of its holdings – the vacancy rate in Vancouver rose to a 12-year high of 10.4% as of June 30, according to Avison Young.

In addition, more commercial space is set to flood the market – six office towers under construction, totalling about 802,700 square feet, are set to be completed this year, according to Avison Young. Despite the vacancy, rental rates for high-quality assets in Vancouver are around $30 a square foot – the highest in Canada, and more than major US cities such as Chicago and LA.

:XeX[XËj f`c gXkZ_ klie`e^ kf ]le[ dXeX^\ij Faced with a lack of options from banks as the energy sector continues to lag, Canadian oil and natural gas companies have found new credit options with funds. The industry’s newest investors include provincial pension fund manager Alberta Investment Management Corp., private equity firm Stream Asset Financial Management and hedge fund Magnetar Capital. Fund managers are targeting highquality, undervalued small and mid-size oil & gas companies that have been closed off to funding from banks and the bond market.

Q&A

Robert Bradburn Wealth management specialist

>@:j ^X`e ^ifle[ Xj Ôo\[$ `eZfd\ p`\c[j jkX^eXk\

CWB WEALTH MANAGEMENT

Years in the industry 9 Fast fact Guaranteed investment certificates are most commonly purchased for retirement plans, as they provide a low-risk fixed rate of return. The principal is at risk only if the bank defaults

Why are GICs a good investment at the moment?

GICs are a good investment at any time for the right person. It really comes down to what a client is trying to achieve. We might select GICs for a client who has a definite timeline and doesn’t want to take on any market risk. Someone who is saving for a down payment for a house, for example – someone who has a future liability that they absolutely have to meet.

Another place we use GICs would be with someone who has a retirement portfolio. They might have 75% of that portfolio with market risk – stocks, bonds, mutual funds. That other 25% would be something that is guaranteed, where it doesn’t matter what the markets are doing.

Who are the providers?

All the major banks and the credit unions in Canada offer GICs.

What yields can you expect on a GIC? On a GIC, for anything up to about 15 months, you would get 1% to 1.5%. Anything up to five years, you would be hard pressed to do shopping and get anything better than 2%. That’s just the nature of

:_`e\j\ _\[^\ ]le[ realizes 2,100% ^ifnk_ Chinese commodity futures trader Wang Bang reported that his Guli Trend Aggressive Strategy Fund has climbed about 750% this year, marking a growth of around 2,100% since its March 2015 inception. Wang, whose fund has seen the highest gains this year among the Chinese funds tracked by Shenzhen PaiPaiWang Investment and Management, credits the gains to supply and demand analysis. “There are always more opportunities to make big profits, or big losses if you are wrong, amid wide price swings,” he told Bloomberg.

the guaranteed marketplace right now.

What are the most common length terms?

In any Canadian institution, you will find anything up to five years, but you won’t find anything past that.

Most institutions, you will be able to find short-term GICs running from 90 days up to a year. You don’t see a lot of benefit from holding a GIC until you have one that’s a year or more, though.

How much is guaranteed by the government?

CIDC insurance guarantees up to $100,000, but really it depends on what registration you’re holding and what name is on the account. There are certain ways you can structure your investment so you have a lot more than $100,000 insured.

You would see an investor that has more than $100,000 in an RSP, and that coverage will be limited per institution, per registration, per individual name. They might have another $100,000 in a TFSA. CIDC insurance is something that a lot of Canadians like to see is there. It gives them comfort that their assets are going to be backed up. But really, CIDC is a nice security blanket, but you would be hard-pressed to find scenarios where it actually needs to be used.

9iffbÔ\c[ :<F X[m`j\j _Xi[ Xjj\kj Xd`[ e\^Xk`m\ iXk\j According to Bruce Flatt, the head of Brookfield Asset Management, institutional investors are looking to real assets to combat the trend of negativeyielding government bonds. Over the past 18 months, Brookfield has raised $27 billion from nearly 250 clients who are interested in hard assets like real estate. That marks the largest amount of capital closed for a series of funds at Brookfield. However, Flatt told shareholders that Brookfield believes there will still be a strong bid for US Treasuries for a long time.

>fc[ i`j\j Xd`[ [fneY\Xk LJ afYj Ô^li\j Gold futures have again gained ground on the heels of lower-thanexpected US employment data in August.

According to the Labour Department’s monthly report, payrolls climbed by just 151,000 in August following a 275,000 gain in July. So far in 2016, gold is up 25% amid uncertainty in the US, fuelled in part by speculation of a Brexit-driven slowdown in Europe. That uncertainty also led the Federal Reserve to reconsider raising interest rates this year, a move that has further bolstered the appeal of gold.

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15

UPFRONT

GOT AN OPINION THAT COUNTS? E-mail wealthprofessional@kmimedia.ca

OPINION

8 e\n kpg\ f] ]Xd`cp f]ÔZ\ Once only ultra-high-net-worth clients had access to a family office experience, but that’s changing, writes Sean Harrell IT USED to be that only ultra-highnet-worth families (those with assets of $100 million or more) assembled a specific group of professionals into a family office to manage their wealth. The duties of this group of professionals were tailored to the needs of the family for whom they worked and could range from investing, business acquisition, philanthropy and accounting all the way to family governance.

Times change, and ideas evolve. People without the capital to create their own single family office [SFO] were reading and learning about the family office model and wanted the same services for themselves.

This led to the creation of the first version of the multiple family office [MFO], an office modelled after the SFO but created by a group of families with slightly lower net worths ($10 million+), who combine their wealth in order to have the MFO effectively manage as much or more than an SFO while keeping costs comparable to an SFO. This, in turn, led to the creation of a second type of MFO, which I refer to as the everyday multiple family office [EMFO].

Simply put, this a group of professional advisors bundling their services to provide advice to people who want high-end services but do not have the net worth required to gain access to an SFO or traditional MFO. I cannot understand why there aren’t more EMFOs out there; they make the client’s life so much easier. A good EMFO consists of one or more of each of the

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following: investment advisors, insurance advisors, living benefits advisors, group benefits advisors, accountants, lawyers and Realtors. The mix can be tailored to an advisor’s target market and could include more professionals if needed.

This is a natural evolution of the financial services industry. CRM2 and other

other advisors offer. It can be as simple as a client having a single investment account at a firm with an in-house accountant.

Taxes must be done each year; it’s a fact of life. With a client’s permission, the investment advisor and accountant can share the investment and tax information required for the tax return, saving the client the time of sending it back and forth. Show me a client who wouldn’t want to have this process taken care of on their behalf.

I believe this sets the table to make EMFOs very successful in the future.

Clients know it’s difficult for one person to be both the best investment advisor and the best insurance advisor. But what if you had the best investment advisor and the best insurance advisor in the same office?

It has been proven that the concept of having multiple advisors, each specializing in an area of finance, is very well received by clients.

Clients like to know they have a team

“Let clients know that you respect the hard work they have done to save their money by providing them with an experience that says so” initiatives are changing the industry for the better; they are forcing advisors to become more client-oriented. The days are gone where people want to meet with their investment advisor one day, then their insurance advisor another, then their banker, then their mortgage broker, accountant, lawyer, etc., to try to put all the pieces of their finances together. Why not have all these professionals in the same place, working together, so they can all be met at the same time?

People are demanding more. Advisors who want to set themselves apart are starting to deliver a high-net-worth family office experience to clients without the high-net-worth credentials. As an advisor, you naturally want to grow your practice, and in order to do so, you need to offer something above and beyond what all

of professionals handling their finances; they don’t want a jack-of-all-trades advisor anymore. If their net worth is not high enough for an SFO or traditional MFO, they will be stuck meeting multiple advisors for their financial needs, so why not put all those advisors all in one location to cater to the client?

Build a team. Let clients know that you respect the hard work they have done to save their money by providing them with o. an experience that says so.

Sean Harrell worked with London Life before founding Trilogy Wealth Management and nd then Howe Harrell & Associates, where he is now a senior advisor and partner. He specializes in high-net-worth families.

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PEOPLE

INDUSTRY ICON

AN IMMERSION IN ETFS After lagging behind the US for years, Canada is now embracing ETFs – and Pat Dunwoody, president of the Canadian ETF Association, says there are a number of factors contributing to that love

WHEN THE Canadian ETF Association was formed in 2012, there were only five ETF providers nationwide. That number is now 18 and counting, and there’s also a raft of new products available in the marketplace these days. It’s a busy time for CETFA executive director Pat Dunwoody, no doubt – she is the organization’s sole staff member, which, given the increase in ETFs over the past three years, is quite the responsibility indeed.

A part of CETFA since its genesis, Dunwoody looks back on those early days.

“It was set up in 2012 to give ETF providers in Canada a unique voice,” she says. “Up until that point, the Investment Funds Institute of Canada incorporated ETFs, but really spoke on behalf of mutual funds. ETF providers felt they needed their own voice.”

In establishing a new entity to serve the interests of ETF providers in Canada, it was crucial to get some of the industry’s key players on board. Right from the start, this wasn’t an issue for the CETFA. “BMO, Horizons and Claymore set up the organization, and we gradually grew by speaking to the other ETF providers on the Street,” Dunwoody explains. “We

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now have affiliates – law firms, accountants, back office – and a small group of portfolio managers who use ETFs almost exclusively.”

The group now has eight ETF providers on board – Mackenzie Investments is the most recent addition after joining in September. CETFA’s membership

time providing them with presentations and information on how the industry works.”

The fee factor This role will only increase in importance in the years ahead as the rules governing the industry continue to evolve in complexity and cost. CRM2 is just the latest and most

“As the regulators put in new rules, we are making sure they know the differences between ETFs and mutual funds, as well as other equities. We are a hybrid, so quite often the rules do not fit our product model” also includes iShares, BMO, First Asset, Horizons, TD and Vanguard, which accounts for 95% of ETF assets in Canada.

Such figures give the organization legitimacy –especially when it comes to dealing with regulators.

“We speak to regulators on behalf of the industry,” Dunwoody says. “They understand we are not speaking for a specific firm, so it’s more balanced. We spend quite a bit of

high-profile development in this area, but many industry players believe it could be just the thin end of the wedge.

“When you look at all the regulations that have come down, fees are finally coming to the forefront,” Dunwoody says.

“It’s not necessarily that specific fees are too high, but the regulators and the media and a lot of the industry do not believe clients truly appreciate what they are paying.”

PROFILE Name: Pat Dunwoody Company: Canadian ETF Association Title: Executive director Years in the industry: 33 Fast fact: ETF assets in Canada recently surpassed the $100 billion mark â&#x20AC;&#x201C; almost double where they were four years ago when the CETFA was founded in Canada

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PEOPLE

INDUSTRY ICON

The fact that the rise of ETFs and the industry shift toward a fee-based model are occurring concurrently is not a coincidence.

Canada, the birthplace of the exchangetraded fund, was slow to warm to ETFs, and the traditional commission-based system has been central to that hesitancy, in Dunwoody’s view.

“For the first 15 to 20 years of ETFs in our industry, products were sold, not

“As the regulators put in new rules, we are making sure they know the differences between ETFs and mutual funds, as well as other equities,” she says. “We are a hybrid, so quite often the rules do not fit our product model.”

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BlackRock Canada The industry leader has 107 ETFs and $52 billion AUM

1

$52 billion

Room to grow While ETFs have enjoyed a steady rise recently, there still is plenty of room for

“We are hoping 2017 will see a lot of MFDA firms being able to sell ETFs, and through that, there will be even more growth than what we have seen in the past few years” bought,” she says. “Clients were very dependent on their advisors for recommendations and advice. In that world, 95% of accounts on the mutual fund side were commission-based. So if they sold an ETF to a client, they weren’t making any money.”

Today, clients are much more savvy regarding their investment needs. The number of products available to them has also grown exponentially, and ETFs are leading the charge. These factors are driving change in the industry, especially when it comes to fees.

“Now that fee-based accounts are becoming more prevalent, the product shelf almost doubles,” Dunwoody says. “You have F-class mutual funds, ETFs and other low-cost mutual funds that didn’t have trailer fees either. There are more and more advisors moving their clients into fee-based accounts.”

The emergence of ETFs over the past decade in Canada means the industry receives a lot more attention from money managers, investors and the media, as well as regulators. Dunwoody outlines what that means for her role.

CANADA’S TOP 5 ETF PROVIDERS

growth. Mutual fund assets in Canada are still about 10 times the size of ETFs. Then there are our neighbours to the south to consider, where ETFs account for US$2 trillion in assets. According to Dunwoody, the Canadian ETF industry has clear expansion plans already in place.

“Almost since the beginning of the association, we have been working on getting MFDA advisors access to ETFs,” she says.

“We have been working with the regulators, IIROC and the MFDA to build a business model that would allow those firms to offer ETFs. We are almost there.”

Those meetings will bear fruit before this year is over, and once the first MFDA firm dips its toe into the ETF water and gains success, plenty more will undoubtedly follow.

“We have done a lot of work with Fundserv, and they will have a pilot this fall,” Dunwoody says. “We are hoping 2017 will see a lot of MFDA firms being able to sell our products, and through that, there will be even more growth than what we have seen in the past few years.”

BMO Asset Management The bank has traded ETFs since 2009 and currently has 66 listed in Canada with AUM of $31 billion

2

$31 billion Vanguard Canada The firm’s Canadian presence continues to grow with 27 listings an AUM of close to $9 billion

3

$9 billion Horizons ETFs One of the original members of CEFTA, Horizons has the secondhighest number of listings (75) and close to $5.8 billion AUM

4

$5.8 billion Invesco Powershares Rounding out the top five providers, Powershares boasts 23 listings and $2.9 billion AUM

5

$2.9 billion 0

10 20 30 40 50 60

When two parties’ interests are mutually aligned, they are said to be “all in the same boat.”

Ever notice our logo?

Everyone says they put their clients’ interests first, but at Vanguard Canada, it’s deeper than that. Our parent, The Vanguard Group, Inc., is owned by Vanguard’s U.S. funds and ETFs. Those funds, in turn, are owned by their investors. This unique mutual structure aligns our interests with those of our investors and drives our culture, philosophy and policies throughout the world.

WE’RE IN IT TOGETHER

vanguardcanada.ca/together Commissions, management fees, and expenses all may be associated with investments in a Vanguard ETF®. Investment objectives, risks, fees, expenses, and other important information are contained in the prospectus; please read it before investing. ETFs are not guaranteed, their values change frequently, and past performance may not be repeated. Vanguard ETFs® are managed by Vanguard Investments Canada Inc., an indirect wholly-owned subsidiary of The Vanguard Group, Inc., and are available across Canada through registered dealers. www.wealthprofessional.ca 21 © 2016 Vanguard Investments Canada Inc. All rights reserved.

FEATURES

COVER STORY: ADVISORS ON FUND PROVIDERS

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Wealth Professional’s annual ranking of Canada’s top fund providers shows that the industry is moving in the right direction – but the advisors we surveyed also have strong opinions about where mutual funds need to improve IT’S BEEN a big year for the mutual fund business in Canada as the third phase of CRM2 finally went into effect in June. That represents a huge sea change for the industry and is reflected in this year’s Advisors on Fund Providers survey – the issue of fees was a great point of contention among our respondents.

While many welcome the increased transparency that CRM2 aims to make commonplace, others believe more regulations will slow down the investment process and make advisors less effective for their clients.

Whatever side of the fence you find yourself on, the old commission-based system does appear to be on the way out, and the providers embracing this change will be the ones advisors look to most in the years to come.

While fees are top of mind for advisors in 2016, the other sides of the business – including backoffice efficiency, IT/technology and marketing – still count when it comes to overall fund performance. In this year’s survey, scores for providers have improved across all criteria.

In addition, one notable feature of this year’s list is the high ranking of some relatively new faces in the crowd, Sun Life Global Investments and Russell Investments. That development suggests that while ETFs receive a lot of publicity for driving innovation in the investment industry, mutual funds are continuing to adapt to fit an ever-changing and challenging environment.

METHODOLOGY Advisors were asked to rank each fund provider on a scale from 1 (poor) to 5 (excellent) across 10 different criteria. All of the fund providers represented here had to receive a minimum number of individual advisor ratings to win inclusion in the final rankings.

The top three firms in each category were awarded gold, silver and bronze medals, while the rest of the top 10 are included in no particular order.

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FEATURES

COVER STORY: ADVISORS ON FUND PROVIDERS CRM2 PREPAREDNESS SPECIAL COMMENDATIONS • Investors Group • Mackenzie Investments • Manulife • RBC Global Asset Management • CI Investments • TD Bank • Capital Group OVERALL AVERAGE

4.17

Sun Life Global Investments

BMO Global Asset Management

It was a long time coming, but the final phase of CRM2 has arrived – and not surprisingly, it was a major issue for advisors when assessing Canada’s top fund providers. In last year’s poll, our respondents felt many of the country’s institutions had plenty of room to improve in terms of CRM2 preparedness. Judging by this year’s responses, fund providers appear to have heeded this advice. This year’s average score of 4.17 compares favourably with last year’s 3.75, which is good news considering that the implications of CRM2 will really start to take effect in January.

Sun Life Global Investments led the way this year.

Although the firm is one of the newer fund providers on this list, they’ve clearly made up for lost time – many of our respondents spoke in glowing terms regarding Sun Life’s products and services. Taking the other two spots on the winners’ podium are BMO Global Asset Management and Invesco.

While the average rating for companies on this issue was pretty high this year, that’s not to say that every advisor out there is completely satisfied. When questioned on how fund providers could improve their

Invesco

service to help advisors succeed in a post-CRM2 world, a common request was to offer software to enable comparisons with other funds. Others suggested that fund providers ensure their statements provide accurate data on what advisors are paid rather than the gross fee investors are charged.

One advisor was unequivocal in what he believed providers should be doing to keep pace in the new investment landscape: “Improve your company’s efficiency, reduce costs, accept a management fee of less than 1% and reduce my clients’ MERs. Otherwise I’m moving more and more towards ETFs.” While CRM2 has been welcomed by a large section of the industry, there are clearly many who believe the changes will do nothing more than hinder advisors in their work. One respondent certainly didn’t mince words when giving his opinion about the new regulations: “Regulators are all lawyers and bureaucrats and have no clue what the real world is like. My practice is thriving because my clients want and value my advice.

Less than 1% actually read fund facts. Most complain about the extra paper.”

?FN CFE> ?8M< PFL 9<<E 8E 8;M@JFI6

4.17%

2.08%

2.08%

91.67%

Less than a year

1-2 years

2-5 years

5+ years

% 0

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20

40

60

80

100

BACK-OFFICE EFFICIENCY

Renaissance Investments

Invesco

In the sometimes overlooked but crucial area of back-office efficiency, Invesco and CI Investments retained their place in the top three, yet both were knocked down a peg by Renaissance Investments, which took the top spot.

A company under the CIBC Asset Management umbrella, Renaissance obviously takes into account that a provider’s reputation extends past the particular funds they offer. Accessing information on those funds in a simple and timely manner is a key consideration for advisors, and although the average score of 4.11

CI Investments

out of 5 suggests that most providers recognize this, Renaissance stood ahead of the pack.

One advisor had specific praise for two of the top 10 providers. “CI and Manulife are better due to access to fund managers and wholesalers,” he wrote.

“There is more communication personally versus just using emails.”

Satisfaction wasn’t universal, however. One respondent claimed that “back-office help is getting sloppy with errors.” That’s a definite no-no in an industry where attention to detail is paramount.

SPECIAL COMMENDATIONS • Investors Group • Mackenzie Investments • Manulife • RBC Global Asset Management • Capital Group • Fidelity Investments • AGF Management OVERALL AVERAGE

4.11

ADVISOR SUPPORT

Russell Investments Renaissance Investments

Sun Life Global Investments

Building relationships is perhaps the most important part of an advisor’s job. That goes for clients, of course, but also for the companies that provide the products to those clients. Bearing that in mind, a provider that takes advisors’ concerns into consideration when moulding its business will always be popular.

So it has proven with this year’s survey: Once again, Renaissance Investments displayed its dedication to high standards across the board. It shares the top spot with Russell Investments, a relative newcomer to the mutual fund business in Canada. Those two edged out

Dynamic Funds

SPECIAL COMMENDATIONS • Mackenzie Investments • Invesco • Fidelity Investments • CI Investments • TD Bank • Franklin Templeton • Capital Group OVERALL AVERAGE

Sun Life and Dynamic Funds, which took the silver and bronze medals, respectively.

In terms of where providers could improve their support, Sandra Nass, a wealth advisor with RBC Dominion Securities, said, “I would like to see the industry as a whole start to provide better support to the negative press mutual funds have been given.

They need to speak up about what a mutual fund provides, as investors simply don’t understand and just think all mutual funds are bad and costly and no one makes money.”

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FEATURES

COVER STORY: ADVISORS ON FUND PROVIDERS OVERALL SERVICE SPECIAL COMMENDATIONS • AIM Trimark • Mackenzie Investments • Capital Group • Dynamic Funds • Invesco • Franklin Templeton • Russell Investments OVERALL AVERAGE

4.15

Renaissance Investments

CI Investments

Renaissance Investments had another good showing in the category of overall service levels, further proof of CIBC Asset Management’s commitment to service with its funds. It’s a completely different lineup for the top three this year, too: Renaissance, CI Investments and Fidelity ousted Investors Group, Invesco and EdgePoint from the winners’ podium, suggesting that service levels in general are improving across the board.

Fidelity Investments

That said, not every provider is offering suitable service, as one advisor pointed out. “There are completely asinine policies regarding the redemption of reinvested distributions from a DSC fund,” he said.

“The fund provider states, ‘Reinvested distributions are free from any commissions; however, [they] cannot be redeemed until all other units (including unmatured) are redeemed.’”

Check out how our funds have delivered.

See the stats at repsource.ca/batterup

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the fund facts as well as the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Manulife

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HOW MANY FUND MANAGERS HAVE YOU BOUGHT PRODUCTS =IFD @E K?< C8JK () DFEK?J6

14.58% 4.17% 18.75% 14.58%

+

47.92% % 0

10

20

30

40

50

Funds and Manulife Corporate Classes are managed by Manulife Investments, a division of Manulife Asset Management Limited. Manulife, Manulife Investments, and the Block Design are trademarks of The Manufacturers Life Insurance Company and are used by it, and by its afďŹ liates under licence.

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FEATURES

COVER STORY: ADVISORS ON FUND PROVIDERS FEES SPECIAL COMMENDATIONS • Mackenzie Investments • Dynamic Funds • Capital Group • CI Investments • Empire Life • Franklin Templeton • Sun Life Global Investments OVERALL AVERAGE

3.77

Fidelity Investments

Sprott Asset Management

Fees remain a sticking point for many advisors, judging by the overall average score of 3.77 in this category, which is much lower than the other categories on this year’s list. It’s a better result than last year’s 3.50, but it still leaves plenty of room for improvement. With

With CRM2 now in force, the issue of fees will undoubtedly remain divisive

Russell Investments RBC Global Asset Management

CRM2 now in force, the issue of fees will undoubtedly remain divisive among fund providers and advisors heading forward.

Taking the gold medal this year is Fidelity, which improved on its second-place showing last year. Sprott Asset Management, Russell Investments and RBC Global Asset Management were the other top firms; Russell in particular earned high praise from one of our respondents, who said, “[They] have the best managed fixed-income fund on the market, and they get kudos from me for lowering fees on it.”

PRODUCT RANGE SPECIAL COMMENDATIONS • AIM Trimark • Mackenzie Investments • Capital Group • Dynamic Funds • Invesco • Franklin Templeton • Russell Investments OVERALL AVERAGE

4.15

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Mackenzie Investments

TD Bank RBC Global Asset Management

While variety is the spice of life, it’s also the case that you can have too much of a good thing. Such is the case in the world of mutual funds – many advisors were critical that providers have flooded the market with too many products. As ETFs continue to grow, mutual funds have had to adapt to a changing investment environment. While that has undoubted benefits, it can make selecting the right product for clients akin to finding a needle in a haystack.

That said, there are plenty of organizations out there offering the right mix of products. Leading the way is

Fidelity Investments

Many advisors were critical that providers have flooded the market with too many products Mackenzie Investments, which took the gold medal this year. TD Bank and RBC Global Asset Management tied for silver, while Fidelity Investments grabbed the bronze.

PRODUCT PERFORMANCE

RBC Global Asset Management

Sprott Asset Management

It was a mixed bag when it came to advisors’ thoughts on product performance in 2016. With an average score of 4.00, the overall results in this category showed improvement over last year’s 3.84. Mutual funds aren’t offering the returns they once did, but advisors still expect a certain level of performance when it comes to products. “I bought a fund that was supposed to give returns mirroring the price of gold bullion,” said one advisor. “Bullion went up 27%, and my fund went up 2.50%.”

RBC Global Asset Management led the way in terms

SPECIAL COMMENDATIONS • Capital Group • Mackenzie Investments • Sun Life • CI Investments • Franklin Templeton • Empire Life • Invesco

Dynamic Funds Sentry Investments

OVERALL AVERAGE

Mutual funds aren’t offering the returns they once did, but advisors still expect a certain level of performance

4.00

of funds offering good results. Sprott Asset Management wasn’t far off in second place, while Dynamic Funds and Sentry Investments shared bronze.

WHAT ARE THE MAIN REASONS YOU CHOSE THE FUND MANAGER FI <K= GIFM@;<I PFL ;@;6

2.08% Client preference

4.17% Marketing

6.25% Compensation

70.83% Product offering

16.67% Service

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FEATURES

COVER STORY: ADVISORS ON FUND PROVIDERS FEE MODEL SPECIAL COMMENDATIONS • Sprott Asset Management • Sentry Investments • Capital Group • CI Investments • Empire Life • Franklin Templeton • Fidelity Investments OVERALL AVERAGE

3.95

Sun Life Global Investments

Dynamic Funds

Now that CRM2 has brought fee transparency to the foreground, providers’ fee models will be a key consideration for advisors as they weigh their options in a crowded marketplace. This year’s average score of 3.95 is an improvement on last year’s 3.61, but it

“I find wading through fee structures time-consuming and not overly user-friendly”

RBC Global Asset Management

suggests there’s still room to boost standards – particularly in terms of simplifying the process. “Navigating various fee structures associated within fund offerings is not intuitive and is a time-consuming process,” said one advisor. Another said, “Specifically regarding the PH&N funds, I find wading through fee structures time-consuming and not overly user-friendly.”

The providers that excelled in this area included Sun Life Global Investments, which took gold. Dynamic Funds and RBC Global Asset Management also had strong showings, taking home the silver and bronze.

IT/ TECHNOLOGY SPECIAL COMMENDATIONS • Sprott Asset Management • Russell Investments • Dynamic Funds • CI Investments • Sentry Investments • Franklin Templeton • Capital Group OVERALL AVERAGE

4.00

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Invesco

Fidelity Investments

While an average score of 4.00 is pretty strong and certainly an improvement on last year’s 3.74, some advisors believe the fund industry still needs to fully embrace new technology. “[It’s] still in the 20th century,” said one respondent. “[There’s a] heavy reliance on fax – no secure, electronic means to send documents and remove fax from transactions.” Considering the vast amount of funds and other investment vehicles available in 2016, offering cutting-edge IT and technology is one way providers can stand out.

In fact, there are plenty of providers out there that

Mackenzie Investments

“Technology is still in the 20th century” are already harnessing new technology to improve the fund experience for investors. In 2016, it’s Invesco leading the way with the gold medal, one of only two top placings for the company in this year’s survey after a particularly strong 2015. Also impressing advisors were Fidelity Investments, which took the silver, and Mackenzie Investments, which earned bronze.

MARKETING

Invesco

Sprott Asset Management

SPECIAL COMMENDATIONS • Russell Investments • Dynamic Funds • CI Investments • Sentry Investments • Franklin Templeton • Mackenzie Investments

Fidelity Investments

OVERALL AVERAGE Marketing is an issue that divides opinion among advisors. While it’s true that new products won’t be much use if investors don’t know about them, others feel it’s an additional cost that often is unwarranted.

As one advisor said about Capital Group, “Their lack of spending on marketing is a major plus and saves my clients money.”

Keeping costs down is perhaps the most important consideration for advisors, but that doesn’t mean marketing has to be neglected; another respondent offered praise for Fidelity for its approach. “They have

Some advisors feel marketing is an additional cost that is often unwarranted

3.96

the most amount of marketing from any major fund company, as far as I can tell, but manage to keep fees reasonable.” Accordingly, Fidelity took home the bronze medal for marketing this year, but lagged behind Invesco (gold) and Sprott Asset Management (silver).

WHAT DO YOU THINK WILL BE THE MOST IMPORTANT ISSUE THAT WILL AFFECT THE 8;M@JFI&=LE; D8E8><I I<C8K@FEJ?@G @E K?< E<OK J@O KF () DFEK?J6

6.25% Market performance

45.83% New regulations (CRM2)

25.00% 22.92%

Product performance

Compensation structures

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FEATURES

MICHAEL LEE-CHIN

K_\ ilc\j f] wealth Michael Lee-Chin has been through more than a few turbulent markets over the course of his storied career. As a result, he now extols the importance of having a good mix of liquid and illiquid assets in your portfolio

MICHAEL LEE-CHIN has been in the public eye now for decades, and as a bona fide celebrity in investment circles, his musings carry some cachet.

Having developed the Midas touch for mutual funds in the late ’70s, Lee-Chin’s companies have both made and lost billions in the intervening years. Today, as president and chairman of Portland Holdings, his personal net worth is a reported $2.95 billion – and if his enthusiasm for the job has waned at all, he certainty doesn’t show it.

Quite the opposite, in fact, and the man who popularized the investment philosophy of ‘buy, hold and prosper’ is keen to convey his beliefs about where the industry is now and where it should be headed. But it’s not just talk – he’s leading the charge with his own firm.

“When we started Mandeville, we had a clean sheet of paper,” Lee-Chin says. “What is the best

design? The best design has to have three component parts that are general to all businesses and all professionals – reputation, differentiation and relevance to customers’ needs.”

Mandeville Holdings – a Portland subsidiary that was formed in 2012 – incorporates Mandeville Private Client, Mandeville Wealth Services and Portland Investment Counsel; from the start, Lee-Chin wanted to make it an institution that could effect change.

“Our ethos is to democratize investment opportunities which before were the purview of only the super-wealthy,” he says.

“That includes doing what we can to change regulations. Our clients in Ontario can now take advantage of the Offering Memorandum Exemption and invest up to specified levels – we were instrumental, through our industry associations, in changing that.”

“Our ethos is to democratize investment opportunities which before were the purview of only the super-wealthy. That includes doing what we can to change regulations”

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LEE-CHIN’S WORDS OF WISDOM “A relationship cannot be sustainable long term unless it has three ingredients – there has to be integrity, there has to be intelligence, and there has to be passion. As a professional, I can only be passionate about things I believe in.”

Tumultuous markets The desire to allow ordinary people the chance to build wealth is something that is clearly deeply ingrained in Lee-Chin, a one-time cruise ship worker and immigrant to Canada. Those feelings were likely magnified during the financial crisis, which was a tumultuous period for him. As he explains, the timeframe when his approach to investing was mocked by some as ‘buy, hold and suffer’ has defined his approach to the industry ever since.

“Mandeville grew out of the financial crisis in 2008,” Lee-Chin says. “I wanted to give my clients the options the ultra-wealthy have in our society.

The crisis was the genesis of Mandeville.”

Having emigrated from Jamaica in 1970, Lee-Chin studied to become an engineer at McMaster University, but instead moved into the mutual fund business soon after graduation. Most people who have followed the investment industry in Canada over the last 30 years will likely be familiar with his story from there – a rapid ascent after borrowing $500,000 to buy stock in Mackenzie Financial in 1983. A bold move, perhaps, but ultimately a wise one – by 1987 the stock had appreciated in value seven-fold.

“I sold the mutual funds I had and put everything into Mackenzie,” Lee-Chin explains. “I didn’t consider it much of a risk because I understood the business. Warren Buffett says diversification is protection against ignorance, but if you don’t feel ignorant, you don’t need to diversify.”

His success with Mackenzie meant he was able to make the first of many acquisitions, purchasing

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FEATURES

MICHAEL LEE-CHIN

the investment firm AIC Limited in 1987, which had $800,000 AUM. Those assets would swell to more than $15 billion at AIC’s peak in 2002, but the new millennium was not as kind to the firm. By the time the financial crisis took hold, its AUM had plunged to $3.8 billion before the company was eventually bought by Manulife in 2009. The insurance giant had also purchased Lee-Chin’s other company – Berkshire-TWC – in 2007, and the experience had a significant impact on how he approached investing after that.

guidelines remain the same today: “You have to own a few high-quality businesses; you have to really understand those businesses; those businesses must be in strong, long-term growth industries; you must use other people’s money prudently; and lastly, you hold the businesses inter-generationally.”

Why, though, did Lee-Chin feel the need to devise his own set of commandments?

“I had to ask myself what I believed in,” he says.

“Every single successful person is a disciple of something. When I discovered the five laws, I decided that was what I would live by.”

“We are totally off-track as an industry from what clients’ needs are. Clients’ needs are to protect capital, grow it and gain income. If you are relevant to what clients’ needs are, then you can justify your fee” “I had just sold Berkshire in 2007, so I got shares and cash in return,” he says. “The [Manulife] share price then was $39.59, and I thought by 2017, those shares should double in value. In 2008-2009, the share price instead fell from $39 to $9; today it is $17, and now that is my proxy for publicly traded securities.”

It was a harsh lesson on the vagaries of the markets, and one Lee-Chin vowed to heed, both with his own finances and his clients’. “I got through the crisis because of my private businesses, not my public businesses,” he says. “But I’m also an advisor, and my clients all had liquid bonds, stocks and mutual funds. So my situation was different from theirs. I didn’t feel good about that because I pride myself on leading by example.”

Rules to live by Ranked by Canadian Business as 26th richest person in the country, and as someone with means to be able to donate $30 million to the Royal Ontario Museum, Lee-Chin has some strong opinions on what it takes to make money. Early in his career as an advisor, he devised his “five rules for wealth creation” – and those

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Those principles have obviously served him well, not just in the investment world, but also in the banking, consumer goods, waste management, tourism and media industries.

Then there are the many personal accolades, most notably receiving one of his homeland’s highest national honours – the Order of Jamaica – in 2008.

More recently, he was appointed chair of the newly established Economic Growth Council by the Jamaican government.

Despite his many outside interests, wealth management still remains a major passion for Lee-Chin. The biggest development in the industry in recent times has been the introduction of CRM2 and the apparent slide toward a fee-based system. In Lee-Chin’s opinion, those who shout loudest about fees are not focusing on the real issue.

“We are totally off-track as an industry from what clients’ needs are,” he says. “Clients’ needs are to protect capital, grow it and gain income. If you are relevant to what clients’ needs are, then you can justify your fee. If not, then I can buy your service less expensively on the internet with a robo-advisor.”

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PEOPLE

ADVISOR PROFILE

K_\ `dgfikXeZ\ f] jkXp`e^ k_\ Zflij\ Tough times gave Manulife Securities’ Andrew Oproiu the conviction he needed to succeed as a financial advisor

WHEN DISCUSSING his place in the wealth management business, Andrew Oproiu points to 2010 as a formative period – although it’s not a time he looks back on with any great fondness. After a disagreement with his partner at Manulife Securities, he found himself out of work, and when bad turned to worse, he even ended up living in his car.

Job interview after job interview came and went, all with the same negative outcome. Despite those disappointments, Oproiu’s faith in his own ability to manage money never wavered, and eventually he received the break he was looking for. That opportunity came with the same company – Manulife – and one team in particular.

“I met with Elie Nour at Manulife and said to him that I would do $7 million in assets in a year or I would walk away from the industry,” Oproiu says. “I lived up to that promise, and now I’m at sitting at $23 million, and I plan on being at $30 million by the end of the year.”

It’s a lofty ambition, but given his career trajectory since coming on board with the Elie Nour Group in 2013, it’s not an unrealistic one. Such growth will come through an approach to investing that has served him well so far.

“I’m not a day trader – I look to buy quality investments,” Oproiu says. “I like to

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buy stocks at a discount, so I will go shopping for individual equities, but I’m not going to speculate or short sell. Last year, my worst portfolio was up 2% and my best was up 4%, and I could have done better if I had more US exposure.”

With the TSX enjoying a bumper year, many have predicted that equities could be set for a fall in the near future. Oproiu is not one of those voices, however, and in his opinion, the doom-and-gloom forecasts are misguided.

“It’s a different market these days,” he says. “China is going to become a consumer economy, so money is still going to be pumped into the system. I don’t see why Canada has to go back to 12,000 on the TSX or the Dow Jones has to crash.”

That’s not to suggest that Oproiu has been going all in on equities over the past year. In fact, fixed income still makes up the majority of his various books. His

investment strategy is dictated by how things are on the ground, so being flexible is key.

“I don’t like to use a rigid set of rules for investing,” he says. “My standard asset allocation is 60% fixed income, 10% cash, and then 20% Canada, 10% US. Back in the spring, I increased fixed income across my portfolios.”

Now that Oproiu has risen through the ranks and earned his stripes as a financial advisor – winning both the 2016 Wealth Professional Newcomer of the Year Award and Nour Group’s Rising Star Award in 2014 – his primary MO is to gain returns for his clients.

As such, earning commissions is something he doesn’t feel the need to shy away from discussing. Although CRM2 has many in the industry worried that clients will balk at advisors’ commissions once they are spelled out in black and white,

NEWCOMER OF THE YEAR Having learned his trade as an associate with the Elie Nour Group at Manulife, Oproiu became a full-fledged advisor just last year. Despite being relatively new to the business, he has been able to build up an AUM of $23 million. This impressive achievement was reflected in Oproiu’s win as Newcomer of the Year at the 2016 Wealth Professional Awards in June. Speaking at the event, Oproiu said eventually winning the Advisor of the Year Award was a career goal for him.

FIXED-INCOME YIELDS Like Oproiu’s clients, more and more investors are turning to fixed income in the face of costly securities, despite the fact that positive yields are hard to come by.

Canada 1.20% A 10-year government bond has a yield of 1.20% as of September 2016 United States 1.70% The same term in the world’s largest economy has a yield of 1.70%

“I like to buy stocks at a discount, so I will go shopping for individual equities, but I’m not going to speculate or short sell” Oproiu has always been upfront with his clients about what he’s being paid and says they have no problem with the idea that advisors can do pretty well on commissions if the results are there.

“When I buy a DSC mutual fund and make my 5% commission, I tell my clients

that money is not coming from their initial capital,” he says. “If you sell your investments, then that’s when the fees come in.

My clients aren’t turned off by the fact I make money, and I shouldn’t be embarrassed that I get paid for what I do. So I don’t have a problem with CRM2.”

Mexico 5.95% This emerging economy offers the highest bond yields in North America at 5.95% Japan 0.01% Negative bond yields have become somewhat of a staple in the Land of the Rising Sun; it’s now 0.04% Brazil 12.27% Though the country is hurting economically at the moment, a 10-year government bond offers yields of 12.27% India 6.85% Everyone’s favourite emerging economy of 2016 offers a 6.85% return on 10-year government bonds Source: Bloomberg

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RECRUITMENT

9XcXeZ`e^ [XkX Xe[ ^lk `ejk`eZk `e _`i`e^ [\Z`j`fej When it comes to making decisions on a new hire, many experts will say that gut instinct should be left out of recruitment. But Christine Khor explains that balancing that innate instinct with cold, hard facts has many benefits

GUT INSTINCT, or intuition, is thought

The role of the gut

of as dangerous ground as it can – and often has – lead to a discriminatory selection process. Using intuition by itself may lead to situations where we only hire people who we know or like, people who we don’t feel threatened by, who remind us of ourselves, who are exactly the same as the other people on our team, etc. In other words, your gut instinct, if not combined with more scientific data, is likely to result in hiring the person you can see yourself having a drink with or inviting to a barbecue – not necessarily the person who is the best for the job.

Though these experts are correct, it is important to note that the role of gut instinct and intuition should not be completely ignored. Instinct plays a vital role in how we make decisions and prevents us from falling into the dangerous territory of groupthink and overanalysis.

Instinct is a biological function that helps us to determine danger. It is a natural subconscious response. Think of a time when you’ve met someone you just didn’t feel comfortable around, and then you later found out that person had a shady past. Your intuition was confirmed by evidence. Think of a time when you felt a little off in someone’s house, only to find out later that your host had just had a heated argument with their partner before you arrived.

This is your brain taking the temperature of a room, feeling the underlying tension and responding to it by eliciting your fightor-flight instinct. When it comes to business decisions, it is usually our expertise, experience and knowledge that allow us to read a situation and respond to it instinctually.

So, why are we ignoring our instincts in business today?

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Analysis paralysis When it comes to business decisions, the fear-of-failure mindset has permeated organizations at all levels and in all industries as a not-so-surprising side effect of having gone through a global financial crisis. It makes sense that after a period of economic instability, businesses will be cautious in their strategy, and business leaders will be apprehensive when making decisions.

However, we all know that this kind of fearbased thinking is the major obstacle to innovation and can have a big impact on the hiring decisions of a business. Because of this fear, businesses are relying heavily on groupthink and committees. Management will call meetings, send group emails, request more research and stall for more time, rather than taking the perceived risk of making a decision. Many executives don’t want to be the one to make the final call in case things go pear-shaped. We like to call this ‘analysis paralysis,’ and it has become rampant in hiring decisions.

Increasingly, recruitment within businesses is being stalled by elongated processes that include numerous rounds of interviews, background checks, psychometric assess-

a high intellect but won’t get bored easily, will work for a salary lower than market rate, and will be satisfied doing a job they have already done before –basically, a unicorn.

Of course, unicorns don’t exist. But people with the potential to grow and learn do. Your best candidate may not tick all the boxes – and in fact, they shouldn’t. If they did, they would have nothing to learn or gain from working at your company and would therefore be a flight risk.

In other words, decision is risk, but in some stage of the recruitment process, a decision has to be made.

The balancing act

When it comes to business decisions, the fear-of-failure mindset has permeated organizations at all levels and in all industries as a not-so-surprising side effect of having gone through a global financial crisis ments, case studies, an increasing amount of reference checks and then a long waiting game where all the data is analyzed but a final decision is still not made. While this is happening, the talented prospects who went through this arduous process have gone on to find other opportunities.

While it is absolutely necessary to gather evidence-based data on the skills, experience and cultural fit of a prospective employee, this process has to be as streamlined as possible and not become excessive. Three references are the standard to get a general consensus on how well a person did their prior jobs; however, we’ve been asked at times to do six.

While it is often necessary to do a secondround interview or have the person meet

additional people within the team, a process of four interviews is excessive. If a manager cannot make a decision based on two rounds of interviews, three reference checks and perhaps one psychometric test, then it is usually their gut instinct telling them that the candidate is not the right person for the job. If instinct were listened to at this point, then a lot of time and money would be saved.

The key to making a good hire is to combine data-based evidence with instinctual responses. What it comes down to is that gut instinct should never trump evidence in the making of a decision, but it shouldn’t be ignored if it is sounding alarm bells. My advice is to pay attention to your instinct when it is telling you not to hire someone, but disregard your instinct if it is telling you to hire someone in spite of the evidence gleaned from interviews and reference checks. It is most likely personal preference at work here.

Second, make sure you qualify your gut instinct with objective reasoning. Are you an expert in the area in question? Have you had a similar experience before, and was your instinct correct at that time? Do other people agree with your instinct? Are you sure that you are not engaging in any form of bias or discrimination?

By removing the fear of risk mentality that may have taken residence in your management team, you give them permission to use their expertise, experience and wealth of knowledge to navigate decision-making.

Provided data-based evidence is not ignored, the instincts of your management team can be a valuable asset to your organization.

Searching for a unicorn The heavy reliance on group consensus and box-ticking not only takes the humanity out of the hiring process, but it also supports the fallacy that there is a perfect person for the job in question – someone who has all the experience, all the skills, does not require training, has

Christine Khor is the managing director of Chorus Executive, a talent management company focusing on the recruitment, coachingg and personal branding of executives. Her book, Hire Love: How to Hire Passionate People to Make ake Greater Profit, is now available through Amazon.n.

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FEATURES

PERFORMANCE

Le[\ijkXe[`e^ g\ijfeXc`kp Xe[ `kj ifc\ `e g\i]fidXeZ\ When it comes to performance – a topic that is constantly on the agenda of most modern businesses – there are a number of different approaches, explains behavioural strategist Warren Kennaugh

ONE APPROACH to performance is to focus on the talent – we are told that if we are serious about improving performance, we need to find and keep talented individuals who will somehow elevate everyone else around them. As a strategy, however, this is not very effective. Enron is an example of a company that took the talent solution to heart, and look what happened to them.

Plus, this approach is expensive, timeconsuming and divisive. It puts a huge amount of pressure on the individual who is supposed to single-handedly turn things around, and at the same time alienates the rest of the workforce, who are clearly viewed as second-class citizens.

The alternative approach is to focus on team performance with the understanding that if everyone lifts their game just a little, then collectively, performance improvements will materialize. Teams may even be sent on team-building or training programs to help facilitate this outcome.

Polarities, not problems What we first need to appreciate is that individual performance and team performance are not separate problems to be solved; rather, according to consultant Barry Johnson, they are polarities to be managed. Polarities are

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ongoing, chronic issues that are unavoidable and unsolvable. And often, attempting to address them with traditional problemsolving skills only makes things worse. Team versus individual performance is a classic example of a polarity.

When faced with performance problems, most business leaders will favour one type of intervention over the other – hire more talent or invest in team-building. The reality, however, is that elevated performance is dependent on individual contribution and collective effort, not one or the other.

Too much focus on individual performance may drive greater individual initiative and creativity, as well as fewer and shorter meetings, but it may also simultaneously activate the downside of individual focus – operating in silos, increased internal competition, and no shared goals or synergy. Too much focus on team performance, on the other hand, may create more cohesive units, but at the same time decrease innovation, increase conformity and slow down decision-making.

By seeing team and individual performance as two separate problems, we engage in the ‘polarity two-step’ – we recruit expensive, talented individuals to solve the individual performance issue, only to inadvertently impair team performance by doing so. And when we ‘solve’ team performance by facilitating greater cooperation and cohesion, we can inadvertently stifle the high performers in the team.

This endless swing from individual to collective focus and back again is timeconsuming and costly. And, perhaps most importantly, it continues to ignore the importance of personality on performance.

Personality and performance When we look at individuals, we see a seemingly infinite array of complex and unpredictable thoughts, emotions and behaviours. This apparent randomness is often so daunting and confusing that personality is considered fodder for the ‘too hard’ basket. So it’s little wonder that everyone sticks with performance improvement theories that are based around individual or collective behaviour.

However, behaviour is massively influenced by personality. Sure, if you want to get

people to do different things or get them to do those things better, you can occasionally alter that behaviour through rewards, incentives or threats, but it’s usually unsustainable. When no one is looking or the bonus cheque has been banked, they will revert to type and go back to doing what comes naturally to them based on their own unique personalities.

When we uncover specific personality markers – namely, ‘inside,’ ‘bright side’ and ‘dark side’ characteristics – we give ourselves the power to orchestrate fit. Fit is the key to elevated consistent performance. The more our natural strengths, characteristics, skill

the right time and in the right place most of the time. By contrast, an average or inconsistent performer is not aware of exactly what those behaviours are, so they are either deployed inconsistently or deployed in a role or environment that doesn’t need or value those particular behaviours.

As a result, performance is often down to chance. This is why sports are so littered with superstitions. In the absence of any real insight into what makes a player good or bad, they fall back on lucky socks and quirky pre-game routines.

What we so often fail to appreciate is

Elevated performance is dependent on individual contribution and collective effort, not one or the other set and values fit with what is required in the role and fit with the culture and organization itself, the higher the performance will be.

‘Inside’ personality characteristics help to identify what naturally motivates and inspires us. Clearly, if what we are required to do in our role is something we are already motivated by or value, then incentives or threats are unnecessary. ‘Bright side’ personality characteristics describe us on our best days. These are our natural strengths and dispositions, which can indicate behavioural strengths. And our ‘dark side’ characteristics are the behaviours that show up when we are under pressure or stressed – they can easily derail our career unless we know about them and take steps to mitigate their impact.

What I’ve found across more than 3,000 profiles of elite performers and by working in this area for over 23 years is that everyone has four or five behaviours that evolve as a result of their unique personality. These patterns of behaviours are the way we have learned to ‘get along,’ ‘get ahead’ and ‘make meaning’ in the world, and we will use those same four or five behaviours consistently.

The only difference between a high performer and everyone else is that a high performer knows what their bespoke behaviours are, or simply deploys them innately at

that behaviour is behaviour, and it rarely changes. Whether that behaviour manifests as a value-adding asset or a career-limiting liability largely depends on how and where it’s used and, therefore, whether we achieve fit or not.

High performance is not so much about what you do; it’s about how you do what you do, why you do what you do and where you do what you do. In fact, the only important consideration regarding what you do is what you do to screw things up.

We don’t need performance coaches to foster talent in every separate area of our life.

What we need is a genuine awareness and understanding of our ‘inside,’ ‘bright side’ and ‘dark side’ characteristics so we can match the best of who we already are to a role and environment that values that contribution.

When we do that, the result is consistent, repeatable high performance.

Warren Kennaugh is a behavioural strategistt who works with elite corporate leaders, gifted professional al athletes and world-leading teams. He is a speaker, researcher and consultant who is the author of FIT: When Talent and Intelligence Just Won’t Cut It. Find out more at www.warrenkennaugh.com or wk@ warrenkennaugh.com .

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FEATURES

COMMUNICATION

The 10 most common YcfZbj kf Y\Zfd`e^ a remarkable Zfddle`ZXkfi How can you become that person who leaves their mark on others through inspirational and memorable conversations? Georgia Murch reveals what to avoid REMARKABLE CONVERSATIONS are those that people can’t stop talking about.

We remember the clarity, ease and the great outcomes that come about. Often those people we have the most inspiring conversations with are also, unsurprisingly, the remarkable leaders – of people, of projects or ideas.

We all know someone who is brilliant at communicating. At a dinner party, their profound input may silence all diners. At the work table, somehow their contribution seems to be worth more. So, what are some of the faux pas that prevent the less impressive communicators from doing it well?

After 20 years of working with people and leaders, this is where I too often see people limit themselves, their relationships and the outcomes they are looking to achieve.

1

Having ‘yoursations,’ not conversations

One of the greatest gifts you can give someone is not your advice, but your undivided attention. To listen – really listen. The goal is to expand the conversation, not to narrow it.

A good conversation is like a tennis rally – back and forth. For communicators taking up more of the airtime in a conversation, it is time to learn that these are known as ‘your-

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sations.’ Yoursationalists could practically have these discussions without the other person present.

2

Making little effort to search for the ‘real truth’

Coming to a conversation or business deci-

sion thinking you have all the facts is as pointless as going to relationship counselling on your own. When you’re the only one contributing, or are only prepared to listen to your side of the facts, you are more likely to reach flawed outcomes as a result. After all, you’re only focusing on number one rather

than considering all the factors and opinions surrounding you. It is a combination of what you know plus what they know that leads to great decision-making, remarkable outcomes and deepened relationship-building.

developed the courage or the right interpersonal skills to discuss the real issue. Or sometimes we interpret the issue incorrectly.

Having a need to be right

We all have a view of the world based on our upbringing, culture, faith, community, age, etc. This then forms how we perceive information, people and circumstances. These lenses, or boards of directors [BODs], skew how we see things. The BODs tell us that our interpretation of life, people and situations

3

When your desire to win the conversation or need to be right dominates the agenda, then you are likely to steer the conversation in the way you need with no real regard for the damage along the way. If you are not prepared to be honest with yourself,

6

Letting the ‘board of directors’ in our head do the thinking

A good conversation is like a tennis rally – back and forth. For communicators taking up more of the airtime in a conversation, it is time to learn that these are known as ‘yoursations’ then how can you expect others to be honest with you? Being right becomes a lonely existence in which very few people trust you and even fewer want to work with you.

4

Not placing enough value on making others feel ‘safe’

Maintaining safety in a conversation is the difference between an outcome and an outbreak. When both parties feel safe enough to be honest with each other is when you reach the best outcomes and preserve – or in some cases restore – great working relationships. When we feel stressed or unsafe in a conversation, physically or emotionally, we have a stress reaction and show fight-orflight behaviours. This leads to an unhealthy exchange that gets worse rather than better.

5

Neglecting to highlight the real issue

Most people don’t feel confident enough to go straight to the heart of the problem. As a compromise, they sugarcoat it or walk around it in the hope that the other person will do the heavy lifting and see the truth hidden underneath. This could be because we have not

is the right one. But what if they are wrong?

They often are. These BODs in our head dramatically influence how we approach conversations before, in the moment and after the fact. They take away our objective thinking and often steer us away from ideal outcomes.

7

Taking others at face value

8

Leading with opinions and feelings, not just the facts

Because of our internal board of directors, we often decide whether someone is right or wrong based on our own perceptions. We look at someone’s words and behaviours and judge them. We only see what they say, what they do and how they look. But this is not who they are. This is often only a small percentage of what’s going on for them. We don’t make the time to consider this.

Often we find it difficult to decipher the difference between the facts and our own opinions and feelings. So we lead with our feelings and opinions in a conversation and wonder why things go wrong. Therefore, it’s easy to understand that when we open

conversations with our ‘facts,’ it’s logical that the other person is not going to effectively take the new information on board.

9

Using honesty as an excuse to verbally assassinate

Those four words: “I’m just being honest.”

They seem to give some people permission to say precisely what they think. When we practice this type of honesty, not only will we see our trust and respect bank being depleted, but also the ‘discretionary effort’ bank, too – regardless of whether we are friends or work colleagues. It will seem as if we don’t want to go the extra distance for these people anymore. They have hurt us.

It’s our own moral compass that we need to take ownership of.

10

Not knowing how to selfmanage in the moment

Are you a lover or a fighter? Do you run and hide or always have to have the last word?

Either way, knowing how you react puts you a step ahead when it comes to self-management in a loaded conversation. Most people don’t recognize their reactions until it’s too late.

Alternatively, if they do, many have not yet developed a ‘toolkit’ to be able to self-manage in the moment. If conversation is the relationship, then how we manage ourselves during that interaction is everything.

While the above 10 are the most common blocks to creating outstanding communication, they are not mountains to climb. The good news is that people can learn the skills and self-awareness to create outstanding relationships and become the people that others want to follow. I have seen it happen, and it creates a shift in cultures that is tangible.

Georgia Murch is an expert in teaching ions individuals how to have tough conversations and create feedback cultures in organizations. tions.

She is the author of Fixing Feedback and a highly engaging speaker. For more information, mation, visit www.georgiamurch.com or email georgia@georgiamurch.com.

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FEATURES

PRODUCTIVITY

?fn kf Yffjk pfli gif[lZk`m`kp `e k_i\\ \Xjp jk\gj To truly work effectively today, writes Dermot Crowley, it’s critical to harness the power of technology and to use it in a coordinated way to manage three core aspects of your work – your actions, your inputs and your outcomes

WE ALL complain about being busy: too much to do, too many emails, too many meetings. Our modern workplace demands so much from us.

Technology promised us an increase in productivity that never really eventuated. You may have all of the high-tech productivity tools at your disposal to help you plan your time and manage your priorities, but are you really leveraging this technology to meet the challenges of the 21st century workplace? Are you working smart?

1

Centralize your actions

Most of us made the transition from paper planners to electronic calendars more than a decade ago. We have one place where we centralize all of our meetings, and we collaborate with other people’s schedules using an electronic scheduling system.

Yet, when it comes to the other side of our activity management and task management, most of us are still very reliant on paper systems, and tend to manage our priorities in fragmented, ineffective piles – piles of emails in our inbox, piles of paper on our desk, piles of actions in our notepad and piles of thoughts in our head. No wonder we are stressed, reactive and behind the eight-ball.

One of the most powerful ways of getting

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in control of your priorities is to embrace technology and centralize all of your tasks into the task system that sits alongside your calendar in your scheduling tool.

Most organizations use Microsoft Outlook, Lotus Notes or Google Calendar as their email and scheduling tool. All of these tools have powerful task systems built into them, yet few people use electronic task systems to manage

for managing your actions, you need to think about how you deal with inputs. You probably receive many inputs every day – emails, paperwork, phone calls, interruptions, meeting actions.

Inputs present a number of challenges for the modern worker. First, there is the volume.

Where a few years ago, 100 emails per day was a lot, now 300 per day is common.

The secret to staying on top of your incoming work is to treat your inbox like a mailbox. It is simply where you receive emails their priorities. It’s time to pull yourself into the 21st century!

The benefits are huge. You will be able to schedule tasks by date and create action lists for specific days. This will ensure you manage your priorities more proactively, and will help you to balance your meeting and task workloads. Best of all, as many of your actions are driven by email, you will be able to schedule emails into your task list or into your calendar for action at the appropriate time.

2

Organize your inputs Once you have a solid system in place

Second, the way most people tend to manage these inputs is problematic. Many of us have hundreds (if not thousands) of emails piled up in our inboxes. We desperately try to stay on top of the pile, marking emails unread or flagging them to maintain visibility of the emails that still need our attention. But it just causes stress, reactivity and missed deadlines.

The secret to staying on top of your incoming work is to treat your inbox like a mailbox. It is simply where you receive emails. It should not be used as a to-do list or a filing system. It should be cleared to zero at least once per week. When you process your

emails, be decisive. Delete what you don’t need. File the things you are finished with but feel you need to keep (and remember that a few well thought-out folders will be quicker and more effective than a complicated filing hierarchy). Delegate anything that is not a good use of your time.

Most importantly, schedule your actions into your task list or calendar rather than keeping them highlighted in your inbox. This will give you greater control over your actions, as you will be managing the priority within the context of your time.

3

Realize your outcomes

How often do you feel like your job has become a series of endless meetings and emails? What about the time you need to work on the really meaningful work? That time just seems to evaporate or get stolen by somebody else’s urgent crises. While meetings and emails are a critical way of getting stuff done, your ability to deliver in your role requires more. It requires time to think, to plan and to work on

the activities that are driven by your outcomes, rather than just your inputs.

Many executives I work with complain about not being able to find time for the important work. But you will never find time for this – you have to make time in your schedule. You need to proactively schedule time for the important stuff and then protect it fiercely. You should protect it from the other people who want to steal your time away, but also from yourself, as it is easy to procrastinate over the more complex work that contributes to our outcomes.

The best way to create a connection between your outcomes and your actions is to invest time in personal planning. Sometimes we need to stop doing and take some time to plan and prioritize. Having a robust weekly planning routine in place is a good way to build a habit around this. Each week, review last week, organize next week, anticipate what is coming up and realign your priorities with what you are trying to achieve – your outcomes.

Tools like Microsoft Outlook are seen as email clients, but they are so much more.

They are designed to help you manage your actions, inputs and outcomes. If they are used in a coordinated way, they can give you the leverage you need to stay productive in the modern workplace.

Nelson Jackson once said, “I do not believe you can do today’s job with yesterday’s methods and be in business tomorrow.”

I would also suggest that we cannot do today’s job with yesterday’s tools and be in business tomorrow. Technology has contributed to our productivity challenges over the past decade, and it can also be a part of the solution – but only if we learn to use it in a smart way.

Dermot Crowley is a productivity thought leader, author, speaker and trainer. He is alsoo the author of Smart Work. For more information, tion, visit dermotcrowley.com.au or email dermot.t. crowley@adapttraining.com.au.

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45

PEOPLE

CAREER PATH

SEIZE THE DAY By never passing up a good opportunity, Bob Roy has built a career that’s taken him all over the industry – and all over the country Roy, an Edmonton native, didn’t venture far from home to pursue his ambitions in accounting, studying for a degree in business administration at the Northern Alberta Institute of Technology “I was excited about accounting, if you can believe that! I wanted to be involved in the accounting profession – that what was started my interest in business”

1971 STUDIES ACCOUNTING

1983

OVERSEES ALL OF WESTERN CANADA Managing first Western Canada and then the whole country for First City Group, Roy became known for sharing his compensation with his staff in the form of bonuses

“It made me significantly more money because people were so entrenched in my success. I realized over my years as a branch manager that the only way you win in business is to treat your employees as equals and create a team environment. You can’t do it by yourself, that’s for sure”

1979 TALKS TO THE BOSS; GETS A PROMOTION Roy started t t d his h accounting hi ti g career att the thh Edmonton Ed head office of the Northwest Trust Company in the mid-1970s. Following his father’s death, Roy found himself on the phone with the owner of the company, storied entrepreneur Dr. Charles Allard “Dr. Allard called and asked me what I wanted to do. I said wanted to be a branch manager. Six months later, a great opportunity for a branch manager in Regina came up. I managed that branch for two years; it was great”

1991 JOINS GUARDIAN Roy joined Guardian Capital Investment, where he eventually became senior vice-president, tasked with recruiting advisors and growing the firm. By the end of his time there, Guardian’s few dozen advisors of the early ‘90s had grown to more than 400 nationally “It was about creating an appropriate corporate environment; the mutual fund business at that time was not well regulated. My job was to ensure Guardian operated above reproach to maintain their good name”

1995

MOVES TO BC Moving on to AIC-Berkshire, Roy was asked to help develop the dealership into a national organization. AIC-Berkshire became a significant operation in Western Canada, and Roy moved to the interior of BC to develop an AIC security office “If I had not seized every opportunity that came my way through the years, it would not have turned out the same way”

2004 RECRUITS ADVISORS FOR CI FINANCIAL Approached by CI Financial immediately im after its purchase of the Assante group of companies, Roy was As offered the position of VP for Western off Canada. Two years later, when a nnational recruiting role came up, he was the obvious choice “It “ was fun and very successful. We brought in literally billions of dollars of br new business”

2013

FORGOES RETIREMENT FOR RAINTREE Thinking he was ready to retire, Roy bought a second home in Arizona, went on several cruises – and discovered that he hated retirement. So he set up a consultancy, which ultimately led him to Raintree “I’m very impressed with the integrity of [Raintree’s] management and the personal sacrifices each partner has made in favour of the business, deferring their own monetary rewards in order to create something really important”

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47

PEOPLE

TELL US ABOUT YOUR OTHER LIFE Email wealthprofessional@kmimedia.ca

OTHER LIFE

THE BIG ONE For Thane Stenner, the real point of fishing is rarely the catch – it’s about reconnecting with friends and family

FISHING HAS been part of Thane Stenner’s life since childhood, when he went out in a small boat with his father and two younger brothers. In those days, the portfolio manager says, the catch might not have been trophy material, but that wasn’t really the point.

“A lot of times we’d get ‘skunked’ – we wouldn’t catch anything,” Stenner recalls. “The experience of being out on the water, spending quality time and talking about life [was what we enjoyed].”

These days, the catch is more impressive, but so is the social aspect

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– Stenner’s more recent fishing trips have been annual guided expeditions in the company of up to 75 friends, colleagues, clients and business contacts in “probably the best fishing spot in the world.” These excursions take place in a fleet of boats, amidst sometimes 12-foot waves and nearfreezing water. But like the forays of his childhood, what Stenner values most is the opportunity to get to know his fishing buddies.

“When you go out on a boat, and you’re out in the beauty, waiting for the fish to bite, it creates some very organic, deeper-level discussions,” he says.

Weight, in pounds, of the Chinook that is Stenner’s guided-expedition record catch

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50

Number of fishing trips Stenner has been on

250

Weight, in pounds, of Stenner’s biggest-ever catch, a marlin (later released)

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