Wealth Professional 5.05

WWW.WEALTHPROFESSIONAL.CA ISSUE 5.05 | $12.95

PORTFOLIO MANAGEMENT POWERHOUSES What strategies are Canada’s leading PMs using to navigate the current investment landscape?

THE CANNABIS CONUNDRUM

Legalization is on the horizon, but is investing in pot a good play?

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RESPONSIBLE INVESTING

Clients are increasingly demanding it – here’s how you can respond

GOING GLOBAL WITH ETFs

How ETFs can help investors branch out beyond Canada

5/05/2017 3:30:15 AM

nadian Sm Ca a p Fund • Ca ll

IA Claring to

n High-performance small-cap funds aren’t supposed to offer lower volatility

•

Ours does.

2

0The IA Clarington Canadian Small Cap Fund, sub-advised by rsary ye a r a n n i ve QV Investors, is celebrating its 20th anniversary.

Exceptional results over two decades with less risk than the S&P/TSX Composite Index.

Growth of $100,000

$800,000 $700,000 $600,000 $500,000 $400,000

IA Clarington Canadian Small Cap Fund Series A S&P/TSX Composite Index BMO Small Cap Index Canadian Small/Mid Cap Equity Category

$708,530 $452,360 $423,880 $396,880

$300,000 $200,000 $100,000 $0 Mar. 97

Mar. 99

Mar. 01

Mar. 03

Mar. 05

IA Clarington Canadian Small Cap Fund Ser. A S&P/TSX Composite Index BMO Small Cap Index Canadian Small/Mid Cap Equity Category

Mar. 07

Mar. 09

Mar. 11

Mar. 13

Mar. 15

Mar.17

20-year annualized return (Since inception)

20-year annualized standard deviation

10.3% 7.5% 7.1% 7.8%

13.5 14.9 18.3 15.0

Talk to your iA Clarington representative or visit iaclarington.com Source: Zephyr StyleADVISOR as at March 31, 2017. Intended for advisors only. The performance data comparison presented is intended to illustrate the Fund’s historical performance as compared with historical performance of widely quoted market indices. Actual Fund performance: 1 yr. 15.7%; 3 yr. 4.1%; 5 yr. 12.2%; 10 yr. 7.3%. BMO Small Cap Index performance: 1 yr. 29.8%; 3 yr. 3.4%; 5 yr. 4.3%; 10 yr. 3.6%. S&P/TSX Composite Index performance: 1 yr.

18.6%; 3 yr. 5.8%; 5 yr. 7.8%; 10 yr. 4.7%. Canadian Small/Mid Cap Equity category performance: 1 yr. 17.1%; 3 yr. 3.1%; 5 yr. 6.5%; 10 yr. 4.0%. The Morningstar Canadian Small/Mid Cap Equity category was created by CIFSC. There are 110 funds in the category. To qualify funds must invest at least 90% of their equity holdings in securities domiciled in Canada, and their average market capitalization must be lower than the Canadian small/mid cap threshold. Effective June 5, 2009, IA Clarington Canadian Opportunities Fund merged into this Fund. There are various important differences that may exist between the Fund and the stated indices that may affect the performance of each. The S&P/TSX Composite Index is the premier indicator of market activity for Canadian equity markets, with 95% coverage of Canadian-based, TSX-listed companies. The index includes common stock and income trust units and is designed to offer the representation of a broad benchmark index while maintaining the liquidity characteristics of narrower indices. The BMO Nesbitt Burns Small Cap Index includes common shares of all Canadian companies trading on the Toronto and Montreal Stock Exchanges with a total capitalization at the beginning of each month which does not exceed 0.1% of the total capitalization of the S&P/TSX Index. The Fund’s market capitalization, geographic, and sector exposure may differ from that of the benchmark. The Fund’s currency risk exposure may be different than that of the benchmark. The Fund may hold cash while the benchmark does not. It is not possible to invest directly in market indices. The performance comparison is for illustrative purposes only and does not imply future performance. The information provided herein does not constitute financial, tax or legal advice. Always consult with a qualified advisor prior to making any investment decision. Standard deviation – The historical risk level of the stated fund, index or peer group category is based on the standard deviation of its investment returns. The use of standard deviation as a measurement tool allows for a reliable and consistent quantitative comparison of historical relative volatility and related risk. Standard deviation is widely used to measure volatility of return and represents the historical level of volatility in returns over set measurement periods. A lower standard deviation means the returns have historically been less volatile and vice-versa.

Historical volatility may not be indicative of future volatility. There are other types of risks associated with the investments presented. Please read the prospectus for further information on the specific risks related to each Fund. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.The iA Clarington Funds are managed by IA Clarington Investments Inc. iA Clarington and the iA Clarington logo are trademarks of Industrial Alliance Insurance and Financial Services Inc. and are used under license.

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ISSUE 5.05

CONNECT WITH US Got a story or suggestion, or just want to find out some more information?

CONTENTS

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48

twitter.com/wealth_proca plus.google.com/+WealthprofessionalCa facebook.com/WealthProfessional Canada

UPFRONT 02 Editorial

Canada’s seniors push for reform

04 Head to head

Real estate and retirement

06 Statistics

Chasing bond yields PEOPLE

ADVISOR PROFILE

PORTFOLIO MANAGEMENT POWERHOUSES

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14 Alternative update

12 ETF update

How ETFs are pressuring hedge funds No IPO? No problem

16 Opinion

Why the behavioural component of financial planning is so crucial

FEATURES 22 ETF portfolio construction

Wealth Professional talked to 21 of Canada’s top portfolio managers to find out how they’re making the most of the current investment climate

FEATURES

PEOPLE

The industry’s biggest night is almost here – find out which of your peers are up for a trophy this year

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10 Intelligence

This month’s big movers and shakers

PORTFOLIO MANAGEMENT POWERHOUSES

Invesco Canada’s Peter Intraligi reveals how his firm has made a name for itself in the Canadian investment industry by doing things a bit differently

Does it make sense to invest in pot?

Retirement specialist Shelley Johnston explains why she’s a proponent of greater clarity in financial planning

COVER STORY

INDUSTRY ICON

08 News analysis

WP AWARD FINALISTS

60

Using ETFs to gain global exposure

50 Alternative solutions

A new firm targets the exempt market

52 An alternative on lending

Why Centurion Asset Management diversified into small business lending

PEOPLE 46 Portfolio manager

How Ian Cooke rose from the ashes of Enron and the financial crisis

70 Career path FEATURES

RESPONSIBLE INVESTING FOR THE FUTURE

Canadians are increasingly reaping the rewards of investing based on environmental, social and corporate governance factors

Time in the far North helped shape Rod Tyler’s approach to clients

72 Other life

Touring on two wheels with cyclist Gordon Ross

WEALTHPROFESSIONAL.CA CHECK IT OUT ONLINE www.wealthprofessional.ca

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5/05/2017 5:17:42 AM

UPFRONT

EDITORIAL

Retirees for reform

G

iven Canada’s aging population, retirees are one demographic financial planners would do well to listen to. Baby boomers make up 27% of the population, while people over age 65 account for 16%. As a result, retirement and estate planning are key elements of most financial advisors’ practices.

However, according to a recent poll by CARP (the Canadian Association of Retired Persons), those entering their golden years are not entirely happy with the service they’re getting from their advisors. The study showed that retirees overwhelmingly favour reform in the wealth management industry – 89% agreed that regulating titles used by people selling investments to the public would help investors make more informed investment decisions. Another 89% called for the implementation of a best interest standard, which appears to align them with regulators, if not the industry in general.

Perhaps the most notable finding from the poll was the section on compensation models; 79% of respondents supported the elimination of embedded fees.

“Investors overwhelmingly support changes that will better protect their life savings. It’s time for governments to stop discussing, debating and delaying, and start taking concrete action”

wealthprofessional.ca ISSUE 5.05 EDITORIAL

SALES & MARKETING

News Editor David Keelaghan

National Accounts Manager Dane Taylor

Writers Libby Macdonald Leo Almazora

Associate Publisher Trevor Biggs

Executive Editor – Special Features Ryan Smith Copy Editor Clare Alexander

CONTRIBUTORS Doug Dahmer Janine Garner

ART & PRODUCTION Design Manager Daniel Williams Designer Randy Pagatpatan Production Manager Alicia Chin Advertising Coordinator Kay Valdez

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

EDITORIAL INQUIRIES

david.keelaghan@kmimedia.ca

SUBSCRIPTION INQUIRIES

tel: 416 644 8740 • fax: 416 203 8940 subscriptions@kmimedia.ca

ADVERTISING INQUIRIES dane.taylor@kmimedia.ca

That result is somewhat surprising, considering the fact that many retirees have paid commissions to purchase investments for most of their lives.

As Wanda Morris, CARP’s vice-president of advocacy, explained: “These poll results reiterate what we’ve repeatedly seen in surveys of our members. Investors overwhelmingly support changes that will better protect their life savings. It’s time for governments to stop discussing, debating and delaying, and start taking concrete action.”

While these issues have been debated at length by advisors across Canada, there is still a real divide on what is the best path forward. The regulators are taking their time before introducing any new rules, but if the CARP study is any indication, their caution is not welcomed by Canada’s senior community.

“When it comes to protecting investors, we are an international laggard,” Morris said. “I believe that opponents of reform have used studies and consultations to indefinitely delay meaningful action. Our members are not prepared to accept subpar protections any longer and want to see change now.”

The team at Wealth Professional

KMI Media 312 Adelaide Street West, Suite 800 Toronto, Ontario M5V 1R2 tel: +1 416 644 8740 www.keymedia.com Offices in Toronto, London, Sydney, Denver, Auckland, Manila, Singapore, Bengaluru

Wealth Professional is part of an international family of B2B publications and websites for the finance and insurance industries LIFE HEALTH PROFESSIONAL david.keelaghan@kmimedia.ca T +1 416 644 874O

INSURANCE BUSINESS CANADA john.mackenzie@kmimedia.ca T +1 416 644 874O

INSURANCE BUSINESS AMERICA cathy.masek@keymedia.com T +1 720 316 0154

Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as the magazine can accept no responsibility for loss

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SIMPLER. SMARTER. BETTER. Dynamic Funds has made it easy for you to access the best available pricing for your clients, no matter your business model.

LOWER FEES Sweeping reductions so all clients get our best pricing.

SMARTER PRICING Fee discounts back to dollar one.

AUTOMATIC No administrative burden; we make it seamless.

TALK TO YOUR DYNAMIC SALES REPRESENTATIVE. dynamic.ca/FeeSimple

Effective June 1, 2016, Dynamic Funds reduced management fees and/or fixed administration fees on Series F of certain funds and introduced a new Series F management fee discount schedule for those investing more than $250,000. Series F units are only available to investors who participate in eligible fee-based or wrap programs with their registered dealer.

Commissions and trailing commissions are not payable on Series F units of the Fund but management fees and expenses may be associated with these investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Dynamic FundsÂŽ is a registered trademark of its owner, used under license, and a division of 1832 Asset Management L.P.

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5/05/2017 3:33:36 AM

UPFRONT

HEAD TO HEAD

How is real estate affecting retirement strategies?

Hot housing markets are providing new options for Canada’s boomers to handsomely pad their retirement nest eggs

Monica J. Weissmann Financial advisor Manulife Securities

Victor Godinho

Managing partner Pangea Global Wealth Group

Linda Spletzer

“Booming real estate values should be reason for joy for savvy retirees – selling into the high-value market may provide good chunks of cash, which, if correctly invested, will ensure income in retirement.

However, the belief in the continuation of the ‘good years’ for many more years is extremely detrimental and dangerous for retirees. Not selling when a correct retirement plan suggests because ‘maybe we will get some more growth, and we can sell anytime’ is really dangerous.

Real estate is not a very liquid asset, and an eventual downturn may dramatically affect those who are assetrich and cash-poor.”

“Toronto is attracting capital from global players, increasing real estate prices. Our Investment Policy Statement that we establish with clients addresses their risk levels, their personal target rate of return and their requirements for either capital appreciation or cash flow. This then guides our retirement discussions.

With a few of our clients who are looking to establish retirement income and may not have the required capital on hand to generate it, we have presented plans where they liquidate their primary residence tax-free using the primary residence exemption and invest the capital to generate retirement income.”

“Clients who have owned their homes for many years leading up to retirement are in a great position. Many of them are currently downsizing and using the balance of their profits to help fund their retirement. Even clients in their 40s and 50s are optimistically counting on their growing home values to help fund their retirement plans within the next 15 to 20 years.

It’s the younger clients who are really concerned, and for good reason. Faced with student debt and high rent costs, many struggle to cover their monthly living expenses, let alone find extra funds to save for their own retirement.”

Financial advisor Raymond James

A BOOST FOR BOOMERS Low interest rates and shrinking inventory have dovetailed with growing demand to turn Canada’s two major population centres into some of the world’s hottest real estate markets.

That has retirement-age homeowners with paid-off mortgages contemplating the best way to make the most of their wildly appreciating asset – a recent CIBC poll found that twothirds of respondents had considered putting their homes on the market and moving to a smaller house or condo as a way to supplement retirement funds. One recent case profiled by the CBC spotlighted a retired couple from East Vancouver who cashed out of their home for $2 million and bought a condo for less than a quarter of that price.

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2017-04-06 2:50 PM 5/05/2017 3:34:22 AM

UPFRONT

STATISTICS BOND ISSUE VOLUME BY COUNTRY

Finding yield in fixed income

CANADA $50.7 billion Top issuer Government of Canada

$9.6 billion

Monetary policy is changing in the US, but what does that mean for the global bond markets?

DESPITE THE Fed committing to raising rates in the US, Bank of Canada Governor Stephen Poloz announced last month that an interestrate hike is still some way off on this side of the border, which led to the yield on government bonds sinking in April. The yield on the two-year federal government note fell below 0.7%, while the rate on the country’s 10-year bond had its steepest decline since last June to land at 1.44%.

Such returns are not proving attractive to

US$1.2 trillion

the level of global credited corporate & financial bonds after the first quarter

investors. Bloomberg reported that the volume of Canadian government bonds decreased 11.06% year-over-year in the first quarter of 2017. Investors instead sought fixed-income exposure in the corporate space – the volume of Canadian corporate bonds increased by 18.78% during the same period. That rise is reflective of the bond markets globally; worldwide, corporate bond volume in Q1 increased 8.06% year-over-year to US$541.6 billion.

451

number of deals underwritten by the world’s biggest bond manager, JP Morgan

5.96%

market share of JP Morgan, compared to Citi (5.73%) and Goldman Sachs (5.22%)

US$4.8 billion the biggest corporate & financials issuer in Q1 was Broadcom Corp

UNITED STATES $399 billion

Top issuer Microsoft

$17 billion

WHERE ARE BONDS BEING ISSUED? The US has by far the highest market volume of bonds worldwide, outstripping the next nine countries put together.

Germany and Canada are notable in that the largest issuers of debt in these nations are the federal governments themselves.

Sources: Global Capital Markets League Tables, Bloomberg, Q1 2017

THE LEADING SECTORS

GOVERNMENT BOND YIELDS STILL DOWN

Canadian corporate bonds are noticeably concentrated in the area of financials – almost two-thirds of the bonds issued here are attributable to that sector.

The peak of the Canada 10-year benchmark bond so far in 2017 came on March 13, when it hit 1.87%. It has since slipped from that level, hovering around the 1.50% mark, which is significantly lower than the long-term average of 2.96%.

5%

Financials: 59%

4%

Energy: 9% Utilities: 9%

3%

Communications: 8% Consumer discretionary: 8% Others: 7%

2%

1% Source: Canada Capital Markets League Tables, Bloomberg, Q1 2017

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May 1 2007

May 1 2008

May 1 2009

May 1 2010

May 1 2011

May 1 2012

May 1 2013

May 1 2014

May 1 2015

May 1 2016

May 1 2017 Sources: YCharts

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UNITED KINGDOM $59 billion

GERMANY $91 billion

Top issuer Barclays

$5.2 billion

JAPAN $47 billion Top issuer Mizuho Financial Group

Top issuer Federal Republic of Germany

$3.2 billion

$22.1 billion

SPAIN $5.8 billion NETHERLANDS $4.6 billion

Top issuer Telefonica

$3.5 billion Top issuer ING Groep

$4 billion

BRAZIL $7.4 billion

AUSTRALIA $35 billion Top issuer Westpac Banking Corp.

Top issuer Petroleo Brasileiro

$4 billion

$5 billion

Source : Global Capital Markets League Tables, Bloomberg, Q1 2017

BETTER RETURNS FROM CORPORATE BONDS

CANADA’S TOP ISSUERS

While yields are also down over the past 10 years on investment-grade corporate bonds in Canada, they remain higher than their safer government counterparts, which has led many yield-hungry investors to make the switch.

Reflecting Canada’s economy, the top 10 issuers of corporate bonds in this country are primarily financial institutions and energy companies.

5%

CIBC $3.15 billion Morgan Stanley $1.75 billion

4%

BCE $1.5 billion RBC $1.5 billion

3%

TD Bank $1.5 billion Bank of America $1 billion

2%

Le Mouvement des Caisses Desjardins $1 billion Power Corp. of Canada $850 million

1%

May 1 2007

May 1 2008

May 1 2009

May 1 2010

May 1 2011

May 1 2012

May 1 2013

May 1 2014

May 1 2015

May 1 2016

May 1 2017

Husky Energy $750 million National Bank of Canada $750 million

Sources: S&P Dow Jones Indices

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UPFRONT

NEWS ANALYSIS

Growth industry With legalization of recreational marijuana use in Canada scheduled for next summer, what are the smart plays for investors in this space?

CANADA IS not best known as a trailblazer. It generally suffers in comparison to its much larger neighbour, but there is one area where the Great White North is now leading the way. On April 17, the Trudeau government tabled legislation to legalize marijuana for recreational use, becoming the first G7 nation to do so. In the US, there are now 29 states where the drug is legal for either medicinal or recreational use, but possession and distribution of marijuana remains a federal crime.

Canada is therefore forging its own path on this issue, creating a new industry out of what was previously the preserve of the black market. That means new opportunities to invest, but is investing in a cannabis producer a smart move? That’s the question advisors across Canada are now asking themselves, and opinion is divided.

Canopy Growth is the heavyweight of

market, but its production facilities mean it is ideally placed to take advantage of the legalization of recreational marijuana. It’s not alone in this respect, either – other key names in the space include Aphria, Aurora Cannabis, OrganiGram Holdings, Supreme Pharmaceuticals and Emblem.

In March, Canaccord Genuity started coverage of the sector; analyst Neil Maruoka named Aurora Cannabis as his top pick.

Maruoka identified the significant economies of scale for existing producers as a positive, but cautioned that making accurate valuations of cannabis companies is difficult.

Grant White of National Bank Financial is one advisor adopting a wait-and-see approach to this sector. “These stocks have shot up, but I don’t think there is a lot to justify where the valuations are,” he says.

“Investors are going on a hope and a prayer on the valuations. I think there will be lots

“These stocks have shot up, but I don’t think there is a lot to justify where the valuations are” Grant White, National Bank Financial the legal marijuana industry in Canada.

Based in Smith Falls, Ontario, it became the world’s first publicly listed cannabis producer in 2014. Today it has a market cap of $1.7 billion and exports to Brazil and Germany. It currently serves the medical

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of demand for the products, but the fact of the matter is we still don’t know how it is all going to work.”

The announcement of the bill to legalize recreational marijuana use was short in detail as to how the drug will be distributed –

a key factor in determining which companies will prosper under the new system. For that reason, White won’t be putting his clients’ money into cannabis stocks anytime soon.

“With a product like this, there are going to be restrictions on advertising, so that could limit a company’s ability to diversify their product and create a leading brand,” he says. “If there is limited ability to develop a brand, then you might run into trouble with the companies you own.”

Despite the reservations, this is undoubtedly an industry with huge growth potential.

The North American medical marijuana market recorded US$6.7 billion in revenue in 2016 – a 30% increase on the previous year. Canaccord Genuity has predicted that Canada’s recreational marijuana market

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OPTIONS FOR INVESTING IN MARIJUANA

American Growth Fund Series II E The American Growth Fund was relaunched in July 2016 as the first-ever diversified mutual fund with a marijuana focus. Its holdings include Gw Pharmaceuticals, Growblox Sciences and Cannabis Sativa, but so far it has failed to gain much traction due to its high fee of 5.75%, leaving it with assets of US$625,667.

Horizons Medical Marijuana Life Sciences ETF Horizons’ marijuana-industry ETF launched on April 5 and quickly amassed assets of $120 million inside its first two weeks of trading – a strong performance for a new fund. During that time, the fund’s price peaked at $11.83 on April 10.

Emerging AgroSphere ETF In the US, ETF Managers Group has filed paperwork to launch its own cannabis-focused ETF, which it hopes to introduce later this year. could reach $6 billion in annual retail revenue by 2021, and medical sales could drive that figure up to almost $8 billion.

Horizons ETFs is one company that

of North American-listed stocks, including licensed producers in Canada like Aurora and Canopy, as well as biopharmaceuticals, medical manufacturing, distribution,

“We went from zero to a $250 million industry, and there’s potential to go over a billion dollars this year” Steve Hawkins, Horizons ETFs clearly sees huge potential in this market.

In April, the firm launched the world’s first ETF dedicated to the medical marijuana industry. The Horizons Medical Marijuana Life Sciences ETF is made up

bioproducts and other ancillary businesses to the marijuana industry. Steve Hawkins, CEO of Horizons ETFs, outlines what this product offers investors.

“One of the benefits of having an ETF

with a diverse portfolio is you are not dealing with the individual volatility of one specific stock,” he says. “We have Scotts and GW Pharmaceuticals in there, which are pretty stable companies. There is a lot of riskreward to get exposure to this industry, but the index we have built is diversified enough to provide a stable return going forward.”

Hawkins and his team at Horizons clearly believe the potential rewards far outweigh the risks, which is why the firm was so keen to become a pioneer in the space.

“The individual use of medical marijuana has grown by 400% to 500% in the past year alone in Canada,” he says. “We went from zero to a $250 million industry in a year and a half, and there’s potential to go over a billion dollars this year.”

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UPFRONT

INTELLIGENCE CORPORATE ACQUIRER

TARGET

PRODUCTS COMMENTS

CIBC

PrivateBancorp

CIBC has raised its original bid of $4.9 billion to $6.6 billion

Sprott Asset Management (executive team)

Sprott Asset Management

Sprott has sold its mutual-fund business to the executives running the unit; the parent company will refocus on gold, silver and mining plays

Total Energy Services

Savanna Energy Services

Total beat out a competing bid from Western Energy Services to acquire shares of Savanna on the TSX

PARTNER ONE

PARTNER TWO

COMMENTS

CPPIB

Phoenix Mills

The pension fund and developer are entering a partnership to build retail-focused developments across India

Ivanhoé Cambridge

Hines

The longtime investment partners are teaming up again to buy downtown Toronto’s Bay Park Centre

RBC announces fund mergers, fee reductions

RBC Global Asset Management has announced changes to several of its funds. Effective June 30, the PH&N Community Values Balanced Fund, the PH&N Community Values Equity Fund and the PH&N Community Values Global Equity Fund will be merged into their corresponding RBC Jantzi funds. On the same date, management fees and administration fees will be lowered by five to 10 basis points for certain series of the RBC Jantzi Balanced Fund, RBC Canadian Equity Fund and RBC Global Equity Fund.

Sprott returns to roots with sale of mutual fund arm

Toronto-based money manager Sprott has sold its mutual fund unit, Sprott Asset Management, to a team of its executives – led by the unit’s CEO, John Wilson, and its president, James Fox – for $46 million. The parent company is moving forward with $7.5 billion in assets under management, and it has retained its role as subadvisor to 10 of the Sprott Asset Management funds, which have $865 million in assets invested in gold, silver and natural resource stocks.

Sprott Asset Management had around $3 billion in assets at the time of the acquisition in April. Rival firms had attempted to acquire the business, but in the end, Sprott decided to sell to the executive team, citing their extensive experience in running asset management firms. The transaction is expected to close by the end of the year, when it’s estimated that Sprott’s headcount of 200 will be cut by half.

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Excel to merge two Indiafocused funds

Excel Funds Management plans to merge the Excel India Growth & Income Fund, a nonredeemable investment fund, into its Excel India Balanced Fund, an open-ended mutual fund. The two funds have consistent investment strategies.

“Unitholders stand to benefit from economies of scale resulting from merging the Excel India Growth & Income Fund with the Excel India Balanced Fund,” said Excel Funds president and CEO Bhim D. Asdhir.

Pending unitholder approval, the merger will be completed on or about June 23.

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PEOPLE Invesco launches new funds aimed at retirees

To help retiring Canadians, Invesco Canada has launched the Invesco Global Dividend Income Fund, which invests in dividend-paying equities from global companies, and the Invesco Global Monthly Income Fund, a fund diversified into 60% equities and 40% fixed income.

Both funds will be run by Meggan Walsh, head of the Dividend Value team at Invesco Advisers Inc. [IAI] in Houston, Texas. Boasting 29 years of experience in managing both equity and fixed-income strategies, Walsh was responsible for developing IAI’s dividend investment process in 2002.

Dynamic Funds updates fees and payment options

Dynamic Funds has announced fee reductions and new payment options to lower costs for unitholders of several of its funds. Effective June 1, fees will be lowered for Series A and applicable Series T, H, L and N unitholders of 83 funds. All Series E funds will be closed to new investors and accounts on the same date. Incremental fee reductions between five and 22.5 basis points will also be applied for investors in certain fund series who reach the thresholds of $250,000, $1 million or $5 million.

NAME

LEAVING

JOINING

NEW POSITION

Luke Gordon

N/A

Goldman Sachs

Head of Canadian mergers and acquisitions

Roy Gori

N/A

Manulife Financial

President

Nick Paldrmic

N/A

BMO Wealth Management US

President, CTC | myCFO

Michelle Scarborough

Kensington Capital Partners

BDC Capital

Managing director, strategic investments and Women in Tech

Darryl White

N/A

BMO

CEO

BMO selects industry veteran Darryl White as CEO

The Bank of Montreal has announced that CEO Bill Downe is retiring at the end of October; succeeding Downe is 23-year investment banking veteran Darryl White. The succession will take effect on November 1, coinciding with the start of a new fiscal year at BMO. White has taken on several key roles at BMO, including spending considerable time deepening the company’s presence in the US. He is currently BMO’s chief operating officer, providing strategic leadership for the bank’s personal, commercial and wealth businesses. He is also a director of BMO Financial Corporation, which oversees activities in the US. Previously, White served as group head of BMO Capital Markets, where he had a direct hand in the success of the division.

Manulife appoints Roy Gori as new president

CI makes portfolio management changes

CI Investments has named a new portfolio advisor, Cambridge Global Asset Management, to its US Equity Alpha Corporate Class fund. In mid-April, Cambridge, a division of CI, became advisor to certain Select International Equity funds; effective mid-June, it will also advise a portion of certain Select US Equity funds. CI has also named Altrinsic Global Advisors as portfolio advisor to the Signature International Fund and Signature International Corporate Class, which have been renamed the International Fund and CI International Corporate Class, respectively.

Manulife Financial has selected Roy Gori, currently the senior executive vice-president and general manager of its Asia division, to be its new president effective June 5. Gori joined Manulife in 2015 as the head of consumer banking for North Asia and Australia. He was also regional head of retail banking for the Asia-Pacific region.

In his new role, Gori will be accountable for the firm’s Canadian, US and investment operations, in addition to Asia. He will also oversee the development and execution of the firm’s business strategy.

“Roy is an enormously capable leader, an innovator and agent of change, and is very committed to customer centricity,” said Manulife CEO Donald Guloien, to whom Gori will report.

www.wealthprofessional.ca

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5/05/2017 3:40:32 AM

UPFRONT

ETF UPDATE NEWS BRIEFS Horizons announces ETF fee reductions Horizons ETFs has reduced the management fee from 0.35% to 0.25% on its Horizons S&P/TSX Capped Energy Index ETF (HXE) and Horizons S&P/TSX Capped Financials Index ETF (HXF). With a synthetic replication structure, the two ETFs are designed to provide unitholders with tax-efficient exposure to the total returns of their respective indices. “We think the combination of industry-low fees and significant after-tax advantages make HXE and HXF very compelling ETFs to use for passive index exposure to energy and financial stocks, the two largest sectors in Canada,” said Horizons ETFs president and co-CEO Steve Hawkins.

First Asset to axe advisorclass ETF units First Asset Investment Management has unveiled plans to eliminate all advisor-class units of its ETFs. New issues of the units, which offered a service fee for advisors who purchased them on behalf of clients, were ceased on April 28. On or around July 7, management fees for current unitholders will be reduced by an amount equal to the previous service fee, and outstanding advisor-class units will be converted into their corresponding common-class ETF units. The change will affect 27 First Asset ETFs.

BMO AM unveils four new global ETFs BMO Asset Management has launched four new global sector-exposed ETFs on the TSX. The BMO Global Banks Hedged to CAD Index ETF (BANK) provides exposure to global banks. The

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BMO Global Consumer Discretionary Hedged to CAD Index ETF (DISC) is focused on global consumer discretionary companies. BMO Global Consumer Staples Hedged to CAD Index ETF (STPL) is invested in global consumer staples. The final product, the BMO Global Insurance Hedged to CAD Index ETF (INSR), is the first ETF to focus on global insurance companies.

Will 2017 usher in an ETF asset explosion?

The first three months of 2017 have seen record inflows into ETFs as investors continue their exit from traditional active funds. London-based consultancy firm ETFGI reported record inflows of US$197.3 billion into ETFs from January to March. If inflows continue at that rate, 2017 will far outstrip 2016, when ETFs gathered US$390.4 billion in new assets. The good times for ETFs mean hard times for active managers, though – Morgan Stanley has forecast a decline of at least 3% in global revenues for fund managers over the next three years.

Could Canadians be at risk from the ETF rush?

ETFs are touted as low-fee, low-risk vehicles, but Martin Pelletier, portfolio manager at TriVest Wealth Counsel, has noted some possible risks for Canadians. In the absence of a fiduciary standard, he said, some advisors may get their clients invested in unsuitable funds. In addition, ETF providers’ tendency to sell ‘hot’ but possibly volatile sector ETFs, coupled with the overwhelming and possibly confusing variety of different ETF exposures, increases the possibility of advisors putting their clients’ assets in products with inappropriate risk levels.

ETFs turn up the fee pressure As investors start to question hedge fund fees, the ETF industry is responding by granting hedge fund access at a lower cost Once upon a time, hedge funds enjoyed significant demand and therefore could name their price; most charged a flat rate of 2% on assets managed and 20% on profits earned. But now, new investment vehicles such as ETFs are forcing hedge funds to compete on costs.

Statistics from hedge fund database provider Eurekahedge showed that a decade ago, hedge funds charged an average annual management fee of 1.68% of a client’s assets.

In 2015, that fell to 1.44%, and last year it went down to 1.39%. At the higher end of the fee spectrum, US-based hedge fund Tudor Investment cut its fees to 2.25% on assets and 25% on profits, down from 2.75% and 27%, respectively.

“We’re finally starting to see competition in the fee area with mutual funds,” Eric Kirzsner, a finance professor at Rotman School of Management, told the Globe and Mail. “The same thing is happening in the hedge fund industry.”

Assets managed by hedge funds contracted

by US$21.8 billion last year, which has not happened since 2008. Aside from that, their historical performance of 3% to 6% over the risk-free rate no longer seems lucrative, as the risk-free rate is almost at zero.

Adam Patti, CEO at New York-based alternative-asset ETF provider IndexIQ, isn’t surprised. “If you’re an advisor and can get a similar performance for cheaper, then you’ll do that,” he told the Globe and Mail. “Fees are on

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5/05/2017 3:41:15 AM

Q&A

a downward trend.”

High-net-worth investors have started to bargain hard, aiming for access to hedgefund-level strategies at lower price points.

Vancouver-based Nicola Wealth, for instance,

“If you’re an advisor and can get a similar performance for cheaper, then you’ll do that” has included hedge-fund exposure in some of its mutual funds, such as the 5% allocation it allows for its balanced portfolio. Some of the strategies are managed internally, while others are managed by hedge fund companies such as California-based Altegris and Toronto’s Polar Asset Management Partners.

According to Ben Jang, alternative strategies manager at Nicola Wealth, the firm still has to pay 2% on assets and 20% on profits to some of the hedge fund managers it works with, but Nicola feels that’s a cost worth bearing for some hard-to-replicate strategies.

Nicola’s investors aren’t on the hook for such fees, however; they only pay the firm between 0.5% and 1.25% on their assets.

Certain ETFs that track hedge fund strategies also provide low-cost access. Toronto’s Purpose Investments has a number of hedged ETFs, including the Purpose MultiStrategy Market Neutral Fund. IndexIQ has the IQ Hedge Multi-Strategy Tracker ETF, a six-hedge-fund strategy package with an AUM of $1.1 billion. The Purpose and IndexIQ hedge ETFs have MERs of 0.80% and 0.75%, respectively, making them more expensive than an S&P 500 ETF but still cheaper than a traditional hedge fund.

Nicolas Richard

Desjardins debuts in the ETF space

Chief operating officer DESJARDINS GLOBAL ASSET MANAGEMENT

Years in the industry 20+ Fast fact Management fees for Desjardins’ ETFs are between 0.10% and 0.25% for fixed-income ETFs, 0.45% for the preferred-share ETF, and 0.50% for multifactor/controlledvolatility ETFs

What made Desjardins decide to get into ETFs? First, we think ETFs are a sustainable, long-lasting trend in the industry, and it’s very important for institutions like ourselves to carve a space in the ETF world. Second, we already have a strong ETF user base, particularly in our brokerage network, Desjardins Securities. So we want to accommodate the needs of those clients.

Third, the way the ETF industry is evolving plays well into our own strengths. We already have strong portfolio management capabilities in fixed income, and we’ve also developed expertise in smartbeta strategies. We think we can really add value in those areas.

What are the different exposures in your ETF lineup?

Since preferred shares have fixed-income-like characteristics, our fixed-income group will manage the preferred-share ETF; they’ll also manage the four fixed-income ETFs. The US and Canadian multi-factor/low-volatility ETFs – as well as two others outside of North America that we’ll launch soon – are essentially investing only in common shares. So I would say that our first foray into ETFs is a fairly balanced one.

What factors do you consider in your multi-factor/ controlled-volatility ETFs? Along with well known factors such as value, size, momentum and volatility, we’re also looking at profitability and investment. We think that if you can identify these factors and implement them in your investment strategy, they are sources of long-term value.

I think the innovation comes not so much from the factor identification, but how we deploy them to do two things. First, we ensure really good diversification. For example, value adds excess returns over long periods, but will underperform over some multiyear periods. The idea is to not over-expose ourselves to any one particular factor, but to create a good diversification. The second one has to do with market dynamics. We want to emphasize the more defensive, capital-oriented factors in a down market and emphasize the one that will add more value in an up market. The result is an ETF that we expect will outperform in the long run, but will also perform relatively well during down markets and keep up with a good-performing market.

You have two other upcoming products. What should investors expect from them?

They follow basically the same approach as the US- and Canadafocused ETFs, but they are invested in global markets and emerging markets. For that reason, they have different particularities – the liquidity is not necessarily the same, for example, in emerging markets. There’s also a greater level of complexity in multi-currency ETFs, which is partly why we have deferred launching those two. We want to make sure we can execute the launch well.

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5/05/2017 3:41:27 AM

UPFRONT

ALTERNATIVE INVESTMENT UPDATE

The growing trend of private companies Going public is falling out of favour, creating additional opportunities for private-market investors

opportunity, but with geopolitical risks fresh in investors’ minds, their appetite for backing young and disruptive firms is limited.

Seizing on this trend, Calgary-based equity administration software provider Solium recently entered into a preferred partnership with Nasdaq Private Market.

Using Solium’s Shareworks platform, private companies served by NPM will be able to

“Private company investors are increasingly seeking a mechanism that enables them to have liquidity events”

More and more companies, especially in the tech space, are choosing to stay private rather than going public. According to a report from EY, IPO activity in 2016 declined year-over-year: A total of US$132.5 billion was raised over 1,055 IPOs, compared to the US$197.1 billion raised in 2015 over 1,258 public-market debuts. Canada had a significant reduction – the most recent annual PwC report on IPOs showed only eight new issues over all the country’s stock exchanges last year, representing a 19-year low.

Driving this trend is the fact that private

NEWS BRIEFS

investors have become more willing to fund late-stage companies. Lower operational cost pressures are also allowing startups to reach profitability without tapping into public markets. And record-low interest rates have let companies use debt financing to fund their expenditures without feeling much of a sting.

In Canada, other factors come into play.

The economy’s reliance on commodities means that IPO activity has historically been tied to the oil sector, which has not yet fully recovered from the oil price plunge in 2015.

Technology is Canada’s other major area of

The party might be over for Canada’s REITs

Canada’s REIT sector could be in for hard times ahead, according to CIBC World Markets. Having gotten too large to make meaningful gains from acquisitions, Canadian REITs will likely focus on internal growth from development and redevelopment – a financial challenge, given increasing interest rates. Canadian REITs also have to contend with capital gains taxation that their international counterparts can more easily avoid. According to CIBC analyst Alex Avery, this “prevents REITs from recycling capital efficiently.”

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manage their cap tables and share plans, as well as access Nasdaq Private Market’s secondary liquidity technology.

“With the proliferation of companies choosing to remain private longer, private company investors and employees are increasingly seeking a mechanism that enables them to have liquidity events,” said Solium CEO Marcos Lopez. With a well managed fintech solution, secondary liquidity can be achieved via trading of private shares.

Current NPM customers using Exact Equity software can migrate their cap tables and share plans onto the Shareworks platform. NPM and Solium will collaborate closely to make sure their respective customers can maximize the benefits offered by the partnership.

Waterous acquires majority stake in heavy-oil producer

Waterous Energy Fund, a private equity outfit from former investment banker Adam Waterous, has acquired a twothirds stake in Northern Blizzard Resources for $244 million. The deal is the latest in a series of oil sands investments by homegrown players. With oil prices stuck below US$60 a barrel and Canadian production costs remaining above conventional crude, investors have questioned the sector’s attractiveness, but Waterous told the Globe and Mail that he sees the trend of heavy oil being “Canadianized” as a positive.

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Q&A

Dustyn Lanz COO and head of communications and member affairs RESPONSIBLE INVESTMENT ASSOCIATION

Years in the industry 4 Fast fact Lanz helped launch Canada’s first financial designations for advisors specializing in responsible investing

The rising tide of responsible investing According to the 2016 Global Sustainable Investing Review, the number of Canadians investing in responsible investment [RI] strategies has increased over the past two years.

What has caused that?

I think high-profile ESG risk events – including those at Volkswagen, BP and Wells Fargo – have shown investors that ESG factors are material and can have serious financial consequences. More and more investors are becoming aware of ESG risks and are seeking to invest in sustainable development opportunities. On the retail side, there’s more of a focus on personal values. Individual investors increasingly want to align their investments with their values, and more and more millennials in particular are having an influence on household investment decisions.

What are some considerable ESG strategies that you’ve observed?

The most prominent strategies over the years have been negative screening, ESG integration and corporate engagement. Canadian responsible investment fund companies like NEI and OceanRock have been very strong on engagement, using their shareholder power to influence companies’ ESG performance. But in recent years, there’s also been a rise of positive screening and thematic products. AGF Investments’ Sustainable Growth Equity Fund has been investing in environmental themes for years. New RI funds from NEI investments, BMO and Desjardins have also emerged in the last

BMO seeks to issue mortgage-backed securities

In a first-of-its-kind deal, BMO is bundling nearly $2 billion of uninsured residential Canadian mortgages into securities. Canadian banks have historically issued bonds packaged from federally guaranteed loans, but the government has reduced its support for housing loans in an effort to cool overheating markets in areas like Toronto and Vancouver. According to a Moody’s pre-sale report, BMO plans to issue a bond backed by $1.96 billion worth of prime residential mortgages, the majority of which will be rated Aaa.

couple of years to meet the growing demand for investments focused on themes like clean technology, resource optimization and women in leadership.

ESG integration is the leading RI strategy in Canada as of 2016. Which investors have contributed most to that?

In Canada, we have some very large pension funds and institutional investors. Roughly 92% of the responsible investment assets belong to pension funds and institutional clients; it would be about that much in the ESG integration category. Individual investors have a smaller piece of the pie, but their assets grew by 91% over two years to reach $118 billion.

The second most popular RI strategy in Canada was corporate engagement and shareholder action. Any particular industries or sectors where this strategy is focused?

Actually, active shareowners use corporate engagement across all sectors and industries. Extractives are getting a lot of attention in the context of climate change, but responsible investors are also concerned with social and corporate governance issues. For example, OceanRock and the Shareholder Association for Research and Education [SHARE] are calling on four companies in different sectors – Morguard Corp., Canfor Corp., Constellation Software and Restaurant Brands International – to increase the number of women on their boards.

Fiera Infra LP fund expands into solar and wind

Fiera Infrastructure has enhanced and diversified its Fiera Infra LP infrastructure fund via an indirect equity interest in a US portfolio of eight solar and wind power generation projects; it plans to add three more later in 2017. All of the projects are owned by affiliates of D.E. Shaw Renewable Investments. Fiera Infrastructure president Alina Osorio said investors can expect stable returns from “long-term power purchase agreements with investment-grade off-takers and longterm financing in place.”

Canadian gold giants create joint venture

Toronto-based Barrick Gold and Vancouver’s Goldcorp have teamed up for several mining projects in northern Chile. The main focus of the partnership will be finding a way to lower development costs on the Cerro Casale project, which Barrick had owned with fellow Canadian firm Kinross Gold. Goldcorp will buy Kinross’ stake in the project and put up US$260 million to jump-start the development of Cerro Casale. Goldcorp also plans to contribute to the nearby Caspiche project.

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5/05/2017 3:42:16 AM

UPFRONT

OPINION

GOT AN OPINION THAT COUNTS? Email wealthprofessional@kmimedia.ca

All in the mind The emotional and psychological side of managing money is the great unsung obstacle for clients who would rather avoid the whole process, writes David Maynard OF ALL THE continuing education and industry designations I have undertaken to keep my knowledge and skills up to date during my 20 years as a financial planner, not a single one has talked about the emotional and psychological side of managing our cash. Even my own cash management left something to be desired – my line of credit was getting near the limit, and my family’s expenses were continuing to climb. How am I supposed to advise my clients on how to manage their cash flow when I’m not even managing my own money well? Something was missing from my own plan, as well as from the advice I was providing to my clients.

When I decided to focus my practice on the family market – couples with a couple of kids, a house with a big mortgage and not enough hours in the day – I discovered that most people I met were living beyond their means and were looking for help. According to a 2016 survey from insolvency specialists MNP, 56% of those polled would have negative cash flow if their monthly debt payments increased by $200. The credit rating agency TransUnion, meanwhile, found that 718,000 Canadians couldn’t absorb a 25-basis-point increase in interest rates.

Now that the price of housing in the Toronto area is reaching the stratosphere, families are taking on huge amounts of debt and not leaving themselves enough room for challenges. Many families can’t survive missing one paycheque. Clearly our advice

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is in great need.

Even those with high net worth need cash-flow planning. I have found that my retired clients are afraid of outliving their money and are not enjoying the results of

In 2015, Manulife Bank hosted a seminar

by Stephanie Holmes-Winton of The Money Finder. Holmes-Winton had encountered the same challenges I had, and she has developed and refined strategies and tools that work. I completed The Money Finder’s Certified Cash Flow Specialist program and learned methods and concepts that are designed to be compatible with human psychology, rather than relying solely on math. As a Certified Cash Flow Specialist, I use a combination of math and behavioural strategies to provide advice my clients can actually follow and can reasonably keep up with for life.

One of the first things I do is simplify a client’s debt structure. Diversification is a great investment strategy, but an expensive one for managing debt. It’s hard to figure out how you’re doing if you have a car loan, line of credit, mortgage and credit card – but put it all in one credit facility, and success can be

“We have to stop pretending all our clients have their spending under control. Our mission must be to defuse the debt bomb and help families fund their dreams” their hard work and planning. A detailed cash-flow plan can show our clients how to maintain their lifestyle into retirement and give them the comfort they need to spend appropriately.

At industry events, I’ve spoke with lots of advisors and found that regardless of their target market (high net worth, mass affluent, young families), they were finding the same challenges and were searching for strategies and solutions to help their clients get more cash coming in than was going out.

So how do we manage our cash flow? I have found most of my clients are like me and would rather avoid the entire budgeting process. We have little time to sit down with our partners to discuss spending, and our individual personalities and developed attitudes toward money can create conflict. So what do we do?

measured by the balance owed.

The second step is to start using cash for discretionary spending. This works very well with joint bank accounts. It’s difficult to keep track of who spent what when you are using debt. With cash, you decide what to spend it on, and if it’s all gone, you’ll just have to wait until next week to have that Frappuccino.

If we are providing advice to Canadian families, then we have to stop pretending that all our clients have their spending under control. Our mission must be to defuse the debt bomb and help families fund their dreams.

David Maynard is a financial planner and investment fund advisor with Investia Financial Services in Brampton, Ontario, who focuses on cash management and helping people get more life from the money they have.

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5/05/2017 3:43:25 AM

PEOPLE

INDUSTRY ICON

THE ROAD LESS TRAVELLED Peter Intraligi, president and COO of Invesco Canada, opens up about some of the challenges of being an independent investment manager in this country

IN ADDITION to his role as president and COO of Invesco Canada, Peter Intraligi added more to his plate last year when he became Invesco’s head of North American retail distribution. The US market is obviously a lot larger than Canada’s, but as Intraligi explains, there are other important differences between the two neighbours.

“In the United States, there’s a view that advice should be independent from manufacturing,” he says. “That fundamentally is the biggest difference between Canada and the US, but also Canada and every other country – we pretty much stand alone in that regard.”

When selecting Intraligi to oversee distribution in the two markets, Invesco tapped someone well versed in all aspects of the business. Intraligi began his career as an analyst with travel company Thomas Cook before embarking on stints with Ernst & Young and the Loewen Group. He joined Invesco in 1999 as vice-president of marketing for Canada and has been on a steady climb since then.

A pivotal moment in that ascension was being named president and COO of Invesco’s Canadian business in September 2007. The timing of that appointment made for some pretty stressful days in his first year, but it was a formative period both for the company and for Intraligi personally.

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“Every business goes through cycles, and we were going through a period of relative underperformance when the financial crisis hit,” he says. “That’s where being part of a global firm like Invesco was a massive advantage. Had we not had the backing of Invesco, and were a stand-alone firm in Canada, I think we would have been in a lot of trouble.”

could weather the storm so well can be attributed to its rock-solid foundations.

“The best way to safeguard a firm is to make sure you have very strong governance and oversight,” he says. “I personally don’t think it’s a surprise that we had no exposure to the securities that caused the financial crisis. We didn’t lay off a single person through the financial crisis.”

“When we launched PowerShares, our competition was trying to use that as leverage against us. They said we were walking away from active management and going passive – today, many of those same competitors have now launched ETFs” Having the support of a worldwide enterprise meant that instead of cutting costs and shedding jobs like many of its competitors, Invesco Canada was actually able to expand during the dark days of the financial crisis. In fact, by 2009 the company was launching its PowerShares ETF suite in Canada, which now accounts for more than $4 billion in assets across 51 offerings.

According to Intraligi, the reason Invesco

From ETFs to PTFs Currently, ETFs/ETPs have more than US$3.9 trillion in assets worldwide, and PowerShares accounts for $110 billion of that total. That leaves it fourth in the global rankings, but as Intraligi reveals, the brand has come a long way since it launched in the US in 2003.

“When we launched PowerShares, our competition was trying to use that as leverage

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PROFILE Name: Peter Intraligi Title: President, COO and head of North American retail distribution Company: Invesco Canada Years in the industry: 24 Fast fact: Intraligi has risen to the top of the financial industry, but he originally started off on a different path, earning a bachelor of science degree in engineering at the University of Toronto

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5/05/2017 3:52:10 AM

PEOPLE

INDUSTRY ICON

against us,” he says. “They said we were walking away from active management and going passive – today, many of those same competitors have now launched ETFs.” Since then, the company has also blazed a trail with its platform-traded funds [PTFs], which provide a lower-fee happy medium between passive ETFs and actively managed mutual funds. Since launching in 2015, Invesco PTFs have amassed close to $150 million in assets. Intraligi believes this

a trailing commission of 1.2% and the other pays 1%, I agree there is a conflict of interest there,” he says. “However, if you have one standard fee where it is always 1% for equities, always 50 basis points for fixed income, then you have eliminated that conflict.”

Intraligi therefore recommends a mix of fee-based and consistent compensation for advisors, depending on the type of product offered. Financial planners perform a vital role in helping Invesco connect with its

“Operating as an independent in Canada is very, very difficult because we don’t own distribution. When it comes to the banks, they are both a competitor as well as a client, so we take a holistic view in partnering with them” vehicle has huge potential, although there are certain impediments currently limiting its progress in Canada.

“Operating as an independent in Canada is very, very difficult because we don’t own distribution,” he says. “When it comes to the banks, they are both a competitor as well as a client, so we take a holistic view in partnering with them. PTFs have not been adopted by the major banks, but we are making progress.”

The great compensation debate For distribution, Invesco relies on a network of independent financial planners and brokers who operate under both commission- and fee-based models. As head of retail distribution, Intraligi has regular contact with advisors, which means he is tuned into the ongoing debate regarding the compensation model in Canada.

“If a financial advisor has to choose between two mutual funds with the same risk and performance profile, and one pays

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clients, in that they explain exactly what the client is getting with an ETF, PTF or traditional mutual fund. Speaking from personal experience, Intraligi believes banning commissions would be a step too far.

“There are a lot of investors who like working with a financial planner where commissions are embedded,” he says. “I sat down with my mom and dad recently. They are both immigrants, and English is their second language – it’s fair to say they don’t have a strong grasp of financial products.”

As with any professional arrangement, the cost of the service was discussed. In this case, Intraligi’s parents preferred to go the traditional commission route, which suggests that a shift to a strictly fee-based business may not be for everyone.

“I described how their advisor was being paid – they had two options: paying it all in with the price of the mutual fund, or paying separately,” Intraligi says. “I didn’t lead them on in any way, and both said they preferred the one fee.”

INVESCO BY THE NUMBERS

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Countries in which Invesco has offices

6,500

Number of Invesco employees worldwide

$835 billion

Global assets managed by Invesco

$4.73 billion

Invesco’s operating revenue for 2016

$1.176 billion Invesco’s income in 2016

2015

Year when Invesco introduced the platform-traded fund to Canada

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5/05/2017 3:52:45 AM

FEATURES

ETF PORTFOLIO CONSTRUCTION

ETF PORTFOLIO CONSTRUCTION WORKSHOP Wealth Professional analyzes how to gain solid returns by using ETFs

THE EXCHANGE-TRADED fund marked its 27th anniversary in March with another record-breaking month. Global ETF assets rose to US$3.8 trillion; Canada accounted for US$92 billion of that amount. Choice has never been greater when it comes to this investment vehicle, and now Manulife has joined the ETF market as well. The firm recently launched four multi-factor equity ETF strategies, bringing the number of Canadian ETF providers to 20.

The days of ETFs being considered a niche product are long gone. Ubiquitous across the investment space, they are as popular with small retail investors as they are with huge institutional names. The growing product list provides a lot more options for investors, but it also makes portfolio construction trickier. What ETF

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should you use for US equities exposure when there are scores to choose from?

The answer is to consult an expert such as Tyler Mordy, president and chief investment officer of Forstrong Global Asset Management.

About the advisor Forstrong has one of Canada’s longest track records managing globally balanced ETF portfolios, dating back to 2001, when exchange-traded funds were a curiosity for most investors. Creating specially designed portfolios for individual investors, financial professionals and institutional players, Mordy has a lot of experience using this investment vehicle, and he says ETFs have especially proven their worth during tumultuous markets.

“A commitment to risk management has enabled our firm to protect client assets during challenging markets like the 2008 global financial crisis, the 2011 euro debt crisis and the 2014 commodity bear market,” Mordy says. “During those periods, we have had particular success with global ETFs.” While the current landscape is quite different than it was in those cases, Mordy believes ETFs are still a good fit for our chosen investor, Diane Taylor. Because most of Taylor’s existing assets are concentrated primarily in Canada, Mordy recommends going global when it comes to ETF selection.

“Given Diane’s already large domestic portfolio, with a large allocation to real estate and domestic stocks, we would recommend a globally diversified ETF port-

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folio,” he says. “The portfolio is a balanced portfolio focused on delivering income and capital appreciation over the long term by investing in a diversified mix of assets through exchange-traded funds with a fully global emphasis.”

PORTFOLIO BREAKDOWN CASH 2.5%

EQUITIES 47.5%

Asset allocation For asset allocation in Taylor’s portfolio, Mordy used a 47.5%/25% equity/fixed income split. His product selection clearly shows a preference for emerging market exposure. For his equity exposure, he selected well established funds from industry giants BlackRock and Vanguard, and it’s a similar tale when it comes to fixed income.

His selection of the Horizons Managed Global Opportunities ETF isn’t much of a surprise, given that Forstrong co-manages the fund. The firm describes it as a “convenient and diversified basket of ETFs held within a single ETF.” Actively managed, it has 16 holdings and is currently overweight to emerging market stocks and bonds, particularly in India and China.

10% VANGUARD FTSE PACIFIC ETF (VPL) This ETF tracks the FTSE Developed Asia Pacific Index, a market-cap-weighted index of securities in the developed markets of the Pacific region. It has AUM of US$3.64 billion, and its MER is 0.10%.

10% ISHARES CORE S&P 500 ETF (IVV) This ETF tracks a market-cap-weighted index of US large- and mid-cap stocks selected by the S&P Committee. It has AUM of US$1.01 billion, and its MER is 0.04%.

10% VANGUARD FTSE EUROPE ETF (VGK) This ETF tracks an all-cap, market-cap-weighted index of developed European securities. It is one of the most liquid funds in the segment, with massive daily volume and tight spreads. It has AUM of US$11.29 billion, and its MER is 0.10%.

10% VANGUARD FTSE EMERGING MARKETS ETF (VWO) This fund tracks a market-cap-weighted index of emerging market stocks, excluding South Korea. It has AUM of US$16.96 billion, and its MER is 0.35%.

7.5%

INVESTOR PROFILE Diane Taylor is an executive at a large public relations firm. She is approaching retirement and has regularly contributed to her TFSA and RRSP accounts throughout her career. She has more than $1.5 million in home equity and recently received an inheritance of $350,000 from her aunt’s estate.

She would like to invest this windfall and is interested in using ETFs in her investment portfolio. She has a medium risk tolerance and already owns some blue-chip finance and telecom stocks in her portfolio.

SPDR S&P EMERGING ASIA PACIFIC (GMF) This fund tracks a market-cap-weighted index of emerging market firms. Tech and finance are dominant sectors, comprising about half of the fund’s holdings. It has AUM of US$32.78 billion, and its MER is 0.49%.

FIXED INCOME 25% 12.5% VANGUARD TOTAL BOND MARKET (BND) This ETF tracks a broad, market-value-weighted index of US-dollar-denominated, investment-grade, taxable, fixedincome securities with maturities of at least one year. It has AUM of US$176 billion, and its MER is 0.06%.

12.5% ISHARES INTERNATIONAL TREASURY BOND ETF (IGOV) This ETF tracks a market-weighted index of local-currency, non-US-government-issued debt. The index caps exposure to countries with higher outstanding debt. It has AUM of US$606 million, and its MER is 0.35%.

OPPORTUNITY OR SECTOR OVERWEIGHTS 25% 25% HORIZONS MANAGED GLOBAL OPPORTUNITIES ETF (HGM) This fund invests primarily in exchange-traded products that are listed on North American stock exchanges and may be exposed to equity securities, fixed-income securities or currencies around the world, or to gold. It has AUM of $12.8 million, and its MER is 0.85%.

www.wealthprofessional.ca

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5/05/2017 4:04:29 AM

FEATURES

ETF PORTFOLIO CONSTRUCTION ETF Q&A Krista Matheson Head of ETFs and structured products Manulife

Manulife recently launched its ETF suite. Why now?

We were cognizant of the fact that we needed a differentiated product. It wasn’t until we were able to secure an arrangement to be the only firm to offer ETFs subadvised by Dimensional Fund Advisors Canada ULC that we felt we had a truly unique value proposition. Furthermore, we needed to make sure we were committed to the business and had a long-term view. That will be an important driver of whether a firm is successful in this space or not.

There’s a lot of competition out there – most of the main mutual fund companies now have an ETF suite. How challenging is that for a new entrant?

My personal view is that ETFs are a great structure, but they shouldn’t be confused with a strategy. You need to have products that can be offered at an appropriate price to have long-term success in this business, regardless of the structure and regardless of the strategy. Dimensional has been implementing multi-factor strategies for over 35 years, so being able to bring someone of that calibre to the Canadian marketplace at a very competitive cost is a great strategy with a great structure.

What did the selection process for finding a partner involve?

We did extensive diligence to find the right partner. Manulife has access to a lot of partnership opportunities, given our size and scope, but Dimensional’s experience and expertise really resonated with us. Strategic beta is a relatively new concept for investors, and to be able to provide

ABOUT MANULIFE INVESTMENTS Manulife Investments, a division of Manulife Asset Management Limited, builds on 125 years of Manulife’s wealth and investment management expertise in managing assets for Canadian investors. As one of Canada’s leading integrated financial services providers, Manulife Investments and its affiliates offer a variety of products and services, including segregated fund contracts, mutual funds, annuities and guaranteed interest contracts.

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exclusive access for ETFs in Canada to a firm that has been successfully implementing multi-factor strategies for over 35 years is exciting for us.

What’s particularly exciting is that we are discovering they are not as well known in Canada as we might have expected, so we have the opportunity to introduce this ‘best-kept secret’ to Canadian investors.

How did you decide to launch your four funds into the Canadian large-cap, developed international, US large-cap and US mid-cap asset classes?

Those are often core parts of an investor’s portfolio. We are looking to build a platform and expect to add more strategies later on, but these are diversified core holdings that can make up a large part of investors’ portfolios.

Are these funds passive or active products?

I don’t think the market has firmly decided what is considered active versus passive. In my personal view, these are active products. While these ETFs will track an index, the index was created to replicate Dimensional’s rules-based methodology, but is passively implemented.

These funds are pretty diversified – do you have plans to introduce more specialized or niche ETFs in the future?

I would say it’s not in our short- to medium-term plan, depending on what you mean by niche. It is unlikely we will be introducing a commodity ETF anytime soon. That said, we will offer more ETFs, but you will likely see them being in the more ‘core’ part of investors’ portfolios.

The ETF space in Canada is dominated by a small amount of big names.

How can Manulife offer investors something new?

There is definitely room for more entrants. According to Investor Economics, strategic beta strategies are the fastest-growing segment of the ETF market, and we have brought a firm considered to be a pioneer of strategic beta to Canadian ETFs. If you look at the mutual fund space, there are hundreds of different Canadian and US equity funds. There’s definitely still room in the ETF market for additional high-quality, differentiated strategies.

We are in an era of intense price competition. How has Manulife responded to that?

By providing value-added strategies at a very competitive price. Additionally, when you look at our management fee, we have included the operating expense. Until an ETF gains scale, the MER can be quite high, but given our long-term commitment to the business, we were able to offer investors a predictable fee right from the start.

Commentary is for general information purposes only and shouldn’t be relied on for specific financial or other advice. Opinions expressed are subject to change based on market and other conditions.

Commissions, management fees and expenses all may be associated with exchange-traded funds [ETFs]. 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.

Manulife ETFs are managed by Manulife Investments, a division of Manulife Asset Management Limited.

www.wealthprofessional.ca

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5/05/2017 4:05:47 AM

NOT ALL ETFS ARE CREATED EQUAL. 35 YEARS OF APPLIED FINANCIAL SCIENCE MATTERS.

DISCOVER THE DIMENSIONAL DIFFERENCE. • A factor-based pioneer • Targets factors that can drive higher expected returns • Global investment powerhouse managing $617B* in assets Only Manulife offers ETFs sub-advised by Dimensional Canada**. repsource.ca/etfs

Commissions, management fees and expenses all may be associated with exchange-traded funds (ETFs). 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. *As of December 31, 2016. **“Dimensional” refers to the Dimensional separate but affiliated entities generally, rather than to one particular entity. Dimensional Fund Advisors Canada ULC (“Dimensional Canada”), is sub-advisor to the Manulife ETFs. Dimensional Canada has certain provincial registrations, and Dimensional Fund Advisors LP, an affiliate of and sub-advisor to Dimensional Canada, is an unregistered exempt international investment fund manager in certain provinces. There is no intention to offer or sell products or services in countries or jurisdictions by any Dimensional entity where such offer or sale would be unlawful under relevant domestic law. Neither Dimensional Canada nor its affiliates is affiliated with Manulife Investments or any of its affiliated entities.

Manulife ETFs 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 affiliates under license.

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5/05/2017 4:05:31 AM

FEATURES

COVER STORY: PORTFOLIO MANAGEMENT POWERHOUSES

PORTFOLIO MANAGEMENT POWERHOUSES Some of Canada’s leading discretionary money managers discuss how to build wealth in the current investment climate WHAT DOES fiduciary duty really mean? That’s the question currently being asked in the US as the Department of Labor wrangles with the investment industry over proposed legislation to ensure financial advisors work in the best interests of their clients. Opponents of the rule say further red tape will only serve to reduce investment options for the mass market. That argument isn’t commonplace among the discretionary portfolio managers featured here. Money managers take their fiduciary responsibility

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very seriously, and many wonder why similar standards aren’t in place across the whole wealth management spectrum.

Canada’s PMs play a vital role in the investment space, guiding some of the country’s most successful entrepreneurs and professionals in the how, when and why of investing their money. Offering some candid thoughts on how money managers and clients can better align, these top portfolio managers provide a valuable insight into how both sides’ best interests can ultimately prosper.

www.wealthprofessional.ca

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5/05/2017 4:08:39 AM

BRIAN S. JONES Vice-president, portfolio manager, investment advisor TD WEALTH PRIVATE INVESTMENT ADVICE Years in the industry: 20 Years as a PM: 15 Industry accreditations: PFP, CIM, FMA, FCSI, ChP Strategic Wealth Typical clients: $1 million to $5 million in assets

Celebrating two decades in the investment industry this year, Brian Jones of TD Wealth believes standards need to be raised across the board for portfolio managers. “I believe there needs to be a much higher level of education and experience to become a PM,” he says. “All firms have different levels of technology, supervision and requirements. Something that is awesome at one firm may not be at another, but the client may believe that everything is equal.”

In that respect, Jones welcomes regulators’ efforts to improve standards in the wealth management space. “I like the moves regulators have made to ensure a best interest standard,” he says.

“The process is slow, but steady. Fulfilling transparency and high-level regulation and supervision will ensure a level playing field for all.”

A veteran of the business, Jones has been plying his trade as a discretionary portfolio manager for 15 years now. Having that fiduciary responsibility brings with it many advantages, but also challenges. “Not having to contact the client to place trades is good for timing and trade execution, but can lead to lack of client contact, education and relationship-building,” he says. “A good contact management system is a must.”

Looking at the changing investment climate over the past year, Jones has rebalanced his portfolios to reflect the stellar performance of Canadian stocks throughout 2016. “Investment strategy and pools have basically remained the same,” he says. “There has been overweighting of the US sector and an overweighting of financials, with movement back toward energy.”

“I like the moves regulators have made to ensure a best interest standard. Fulfilling transparency and high-level regulation and supervision will ensure a level playing field for all” As the Fed increases interest rates and speculation mounts that the Bank of Canada will follow suit early next year, many money managers are updating their fixed-income strategies. For his part, Jones says that while bonds may have lost their allure for many in the low-interest-rate environment, they remain a key part of any portfolio.

“Fixed income has been a challenge, but it will always be the core,” he says. “ETFs, alternative fixed-income products and preferred shares have been added to increase return, but that’s not to lose sight that principal protection is the main goal of fixed income.”

www.wealthprofessional.ca

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5/05/2017 4:08:44 AM

FEATURES

COVER STORY: PORTFOLIO MANAGEMENT POWERHOUSES JULIE BROUGH

OLIVIA WOO

Executive vice-president and portfolio manager LOGAN WEALTH MANAGEMENT

Investment counsellor and director MAWER INVESTMENT MANAGEMENT

Years in the industry: 22 Years as a PM: 17 Industry accreditations: CFP, CFP Typical clients: High-net-worth families and smaller institutions

Years in the industry: 23 Years as a PM: 18 Industry accreditations: CFA Typical clients: High-net-worth ($2 million+) and ultra-high-net worth ($10 million+) investors

To the surprise of almost no one, the Bank of Canada decided to hold its key rate at 0.5% in its latest update in March. For portfolio managers like Julie Brough, almost a decade of ultra-low rates has made things quite challenging when it comes to fixed-income exposure in her portfolios – but there are solutions.

“In general, we see three directions firms have gone in to deal with the low-interest-rate environment,” she says. “The first is increasing exposure to low-beta equity or equity alternatives such as infrastructure funds. The problem with that strategy is that the correlation to equity markets remains.”

The second strategy is using non-investment-grade debt, but this brings with it greater credit risk. “It is estimated that the default rate increases from 2% to approximately 8% when moving from a BBB to a BB,” Brough says. “When building a portfolio, that is a significant increase in expected failure rates – one default can offset all of the pick-up in yield.”

“I think the industry needs to be more aggressive about pushing poor advisors out. I think this would benefit both the industry’s reputation and, of course, benefit the clients” The third approach is simply accepting the low yields, or as Brough puts it, “controlling the risk and recognizing that you can’t change the environment that you are in.” Her team at Logan Wealth Management has adopted a two-pronged approach, seeking out bonds that offer returns while maintaining high credit quality, while also being willing to compromise with bonds that offer the best value in a challenging marketplace.

With 17 years as a portfolio manager to her name, Brough has strong opinions on some of the industry’s shortfalls – particularly when it comes to protecting investors. “I think the industry needs to be more aggressive about pushing poor advisors out,” she says.

“I think this would benefit the industry’s reputation and, of course, benefit the clients.”

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Dealing primarily in equities, Olivia Woo has noticed that the conversations she has with clients change depending on how stocks are performing at the time. When the market is riding high, many investors increase their risk tolerance.

That’s why people with significant assets use portfolio managers in the first place – often they do not understand what their true risk tolerance is, and experts have a lot more discipline when it comes to taking the long view.

“Clients’ expectations have certainly changed – I have noticed they have become much more short-term-focused,” Woo says. “That’s primarily because there’s a lot of information out there, so people are influenced a lot easier and their time horizons tend to be shorter.”

Having information and having knowledge are two different things, which is where portfolio managers like Woo come in. “We are long-term investors, so we don’t want to get swayed by noise

“We are perpetually in a bull market – it’s just a perspective of time. Fifty years from now, the markets will still be going up” in the market,” she says. “We don’t want to make an investment decision based on something we have no control over, like geopolitical risk.”

Instead, Woo and her colleagues at Mawer Investment Management look at the companies behind the share price on a deeper level. By doing this, Woo is able to judge which stocks will succeed over different market cycles. “We do look what’s going on at the macro level,” she says, “but we focus on what’s going on with the companies and their fundamentals. Our investment strategy hasn’t really changed between 2016 and 2017.”

When considering the prospect of an upcoming correction in the markets, Woo isn’t losing any sleep. “We are perpetually in a bull market – it’s just a perspective of time,” she says. “Fifty years from now, the markets will still be going up. We might have some short-term ups and downs in between, but in general the trend is always going up.”

www.wealthprofessional.ca

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5/05/2017 4:09:27 AM

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Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. The iA Clarington Funds are managed by IA Clarington Investments Inc. iA Clarington and the iA Clarington logo are trademarks of Industrial Alliance Insurance and Financial Services Inc. and are used under license.

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5/05/2017 4:09:37 AM

FEATURES

COVER STORY: PORTFOLIO MANAGEMENT POWERHOUSES JENNIFER BLACK

NEIL R. MCIVER

Private wealth manager, portfolio manager DFS PRIVATE WEALTH (MANDEVILLE PRIVATE CLIENT)

Director of wealth management and portfolio manager MCIVER CAPITAL MANAGEMENT (RICHARDSON GMP)

Years in the industry: 14 Years as a PM: 1 Industry accreditations: CFP, FMA, CIM Typical clients: Families with more than $1 million of investable assets

In contrast to many of the portfolio managers featured here, Jennifer Black is new to the job. While she has been in the wealth management business for 14 years, this is her first as a discretionary PM. As such, she offers a unique perspective on what the job entails and improvements that can be made to benefit clients.

“I would like to see more client cost transparency,” she says. “CRM2 addressed some of the costs by showing what dealer revenue is per client, but it did not address hidden costs embedded within MERs that a client is paying.”

In addition, Black is a supporter of the drive toward a best interest standard across the wealth management space, where she believes there is currently too much grey area. “Just being an advisor and passing some courses is not enough,” Black says.

“Advisors need to provide clients value-add year after year in order to earn business. Is the client simply coming to an advisor for investments, or are they looking to get guidance in other areas as well?”

“Just being an advisor and passing some courses is not enough. Advisors need to provide clients value-add year after year in order to earn business” As an accredited discretionary manager, Black can move as she see fits when investment opportunities present themselves.

Being able to take immediate action is a big plus for her, although she always takes the long view when it comes to her clients’ assets. “Our portfolios are designed for the long-term goals of our clients,” she says. “We ensure that anything short-term, like shortterm cash-flow needs, can withstand a market correction.”

Her firm, DFS Private Wealth, is under the Mandeville Private Client umbrella, so it’s not too surprising that alternatives and private equity are key components of her portfolios. On the fixed-income side, with the key rate in Canada still entrenched at 0.5%, Black looks globally for exposure. This diversification helps to protect her clients should a market correction occur. “The markets’ continued rise does bring some caution,” she says, “but we are always cautious when building our portfolios to ensure downside protection at all times.”

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Years in the industry: 24 Years as a PM: 8 Industry accreditations: CIM Typical clients: Retired business owners

As the founder of McIver Capital Management at Richardson GMP, Neil McIver has observed certain similarities in the investors who come through his door, regardless of their asset size or risk tolerance. “All clients share a sincere desire for transparency,” he says. “At a minimum, they all want to understand at least the basics of the investment process used to manage their money, as well as to understand our motivation and how we are paid.”

Transparency is a word that gets thrown around a lot in the wealth management business, but in McIver’s view, efforts so far have fallen short. “I think we need to provide complete cost transparency to the client, not just reporting commission or compensation,” he says. “For instance, the new IIROC feereporting regulations do not cover much of the investment industry and do not cover management expense ratios on mutual and pooled funds.”

“It’s about explaining to clients the difference between what we are capable of doing for them versus what the majority of the investment industry can do for them” Greater transparency helps build trust – an essential ingredient in the portfolio manager/client relationship. It can be a leap of faith for some people to entrust their financial wellbeing to another person, especially as many of those using a discretionary manager tend to be successful business owners and professionals with strong opinions of their own. “It is about explaining to clients the difference between what we are capable of doing for them versus what the majority of the investment industry can do for them,” McIver says. “Similarly, it is explaining our fiduciary responsibility to clients versus the agency duty owed to clients by most salespeople.”

McIver recognizes that for clients, the priority will always be on returns and protecting capital, and in that respect, he and his team are proud of their ability to build portfolios that expose clients to the least amount of risk for their desired growth level. “We have an excellent third-party audited track record, which clearly shows the standard deviation each model portfolio has experienced,” he says.

“It shows the perfectly linear relationship between the returns each growth-oriented portfolio has experienced and the volatility. It is the flawless intersection of math, science and reality.”

www.wealthprofessional.ca

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5/05/2017 4:09:54 AM

DONA EULL-SCHULTZ President LEON FRAZER & ASSOCIATES Years in the industry: 35 Years as a PM: 29 Typical clients: Clients across Canada with $1 million or more in investable assets

Established in 1939, Leon Frazer & Associates’ history runs parallel to that of the wealth management industry in Canada. Today the firm has more than $1 billion in assets under management and has developed a reputation as a leader in dividend investing. Dona EullSchultz, the firm’s president, has been a portfolio manager for 29 years. In that time, she has noticed the demands of her clients change markedly, echoing Canada’s demographic shift.

“The banks now have ads posing the question: ‘Have you planned for a 30-year retirement?’” Eull-Schultz says. “That’s

“We do the same thing year in, year out – our focus is on beating inflation, because at the end of the day, inflation is the enemy of the investor” not an unusual number to be looking at. People are concerned about whether they have saved enough and if their portfolios are generating enough income to be able to support them through a long retirement.”

Since Leon Frazer & Associates was founded some 78 years ago, many of its competitors have come and gone. In Eull-Schultz’s view, the firm’s longevity comes down to the high standards it set right from the beginning – standards that have not wavered over the decades. “The focus here has always been on doing your due diligence, understanding who your client is, the purpose of their money and investing it accordingly,” she says. “That never changes.”

What does change is the outside world and the investment climate that PMs operate in – the performance of Canadian equities in 2015 versus last year is a testament to that. Regardless, Eull-Schultz is stringent on how she applies her investment strategy, with one key goal as its backbone. “We do the same thing year in, year out – our focus is on beating inflation, because at the end of the day, inflation is the enemy of the investor,” she says. “Our nominal target is 3% above the rate of inflation; if we do that without too much risk, our clients will always be able to afford their lifestyle.”

Eull-Schultz and her firm believe stocks are undoubtedly the best way to achieve that goal. Canadian equities have certainly garnered plenty of returns over the past year, which has proven fruitful for an equity-based manager like Leon Frazer & Associates.

“It is our belief that equities are the best way to combat inflation, so we buy good companies that maintain and increase their dividend income,” Eull-Schultz says. “They have long-term sustainable business models and income streams – utilities, banks, telecoms and pipelines.”

www.wealthprofessional.ca

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5/05/2017 4:10:13 AM

FEATURES

COVER STORY: PORTFOLIO MANAGEMENT POWERHOUSES MAURICE CONTI Vice-president and portfolio manager HEWARD INVESTMENT MANAGEMENT Years in the industry: 30 Years as a PM: 20 Typical clients: Private clients, family holding companies, institutions and charitable organizations

Three decades in the business have allowed Maurice Conti to gain a strong sense of what Canadians need and expect from an investment advisor. The main concern for clients, especially baby boomers, is having enough income to sustain them through retirement, but balancing that goal with a desire for returns is sometimes a difficult proposition. “Educating clients on reasonable return expectations can be challenging,” Conti says. “It can be a challenge to provide decent returns for relatively conservative portfolios, to provide adequate income returns in a lowinterest-rate environment and to keep ahead of benchmarks.”

“We subscribe to the old adage that bull markets never die of old age. This recovery has been well below normal rates.

Therefore, it should last longer, possibly setting a new record for a bull market cycle” Beating benchmarks is easier in some years than others, and 2016 was certainly a test for PMs in Canada. “In 2016, our portfolios were geared towards Canada; now, we foresee a reduction in Canada in 2017,” Conti says. “We are reducing exposure to US markets and increasing exposure outside North America and to more economically sensitive sectors.”

When it comes to fixed income, Conti has favoured provincial and corporate bonds, supplementing bond holdings with preferred shares, select high-yield stocks and alternatives, as well as REITs. In contrast to many of his peers, he believes the current bull market still has plenty of legs left. “We subscribe to the old adage that bull markets never die of old age,” he says. “This recovery has been well below normal rates. We have not seen a year – maybe a quarter or two – in which GDP growth approached 3.5% to 4.5%. Therefore, it should last longer, possibly setting a new record for a bull market cycle.”

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www.wealthprofessional.ca

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5/05/2017 4:10:51 AM

FINANCIAL TRUST

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5/05/2017 4:11:04 AM

FEATURES

COVER STORY: PORTFOLIO MANAGEMENT POWERHOUSES FRANÇOIS TÊTU

STEVE NIELSEN

Vice-president and portfolio manager DESJARDINS SECURITIES

Investment advisor and portfolio manager MILESTONE ASSET MANAGEMENT (CANACCORD GENUITY WEALTH MANAGEMENT)

Years in the industry: 25 Years as a PM: 8 Industry accreditations: CIM, FSCI Typical clients: Business owners and executives, professionals, trust funds and foundations

In formulating an investment strategy, there’s a lot more choice out there now when it comes to products, particularly in light of the growing popularity of ETFs. This is an advantage for modernday PMs, but only if they fully understand the myriad investment vehicles available. François Têtu of Desjardins Securities explains how this has shifted his selection process in recent years.

“ETFs are more than simple, passive investments – they are key portfolio tools,” he says. “Fixed-income offerings have become scarce as bond desks hold lower inventories; this is another area where ETFs have added value.”

Another major change for Têtu has been the increased level of competition as more and more advisors elect to become portfolio managers. For those who decide to go that route, there is a lot to consider before making that leap, he says. “Even though the advisor benefits from the operational efficiencies that come from using a discretionary business model, some clients can be anxious at the onset.”

When it comes to the nuts and bolts of stock selection, ETFs have become a valuable tool for Têtu, especially when it comes to making contrarian calls.

“Even though the advisor benefits from the operational efficiencies that come from using a discretionary business model, some clients can be anxious at the onset” “In early 2016 we added the Brazil index (EWZ) as one of our positions,” he says. “Brazil was experiencing a difficult political situation, and therefore their currency was pressured downwards.”

Brazil is a major commodity exporter, so the devalued real was a boon for exporters and investors who knew where the smart money lay. Têtu divested from Brazil last November, putting the profits he made into the Mexico Index (EWW), which had plunged after the US election. It proved to be a savvy move – since then, Mexican stocks have bounced back strongly.

Closer to home, Têtu decided to take some profits from the US banks and technology firms in his portfolios. He is confident the bull market will continue to gather steam, so he is currently holding a larger cash position until he finds good opportunities using a bottom-up, economic-value-added [EVA] approach.

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Years in the industry: 17 Years as a PM: 10 Industry accreditations: CIM, CFP, FMA Typical clients: Small business owners, professionals and retirees

Marking a decade as a portfolio manager this year, Steve Nielsen has developed a keen sense for the markets and how best to navigate them. This means always having one eye firmly on the downside. “I approach each year the same way – expecting at least one market correction, so I make tactical asset allocation adjustments based on seasonal or technical patterns that I feel warrant these changes,” he says.

That’s in the short term, but portfolio managers need to prioritize long-term needs. Along with his co-manager at Milestone Asset Management, Shawn Boos, Nielsen’s longterm asset allocation is driven more from a full business cycle perspective and only changes significantly when US recessionary risk rises to a certain level. “We have developed our own gauge for this, called our Milestone Recession Risk Composite,” Nielsen says. “This is made up of 10 underlying leading indicators to keep our recessionary risk judgment an objective one.”

This proved particularly useful in early 2016 when equity mutual fund outflows were at an extreme level. According to Nielsen, the composite kept him from lowering risk assets, which greatly benefited him over the remainder of the year. Looking at US fundamentals currently, he remains cautiously optimistic. “At this point in time, we believe we are still in a secular bull market that began in 2009 and still has room to go,” he says.

In terms of fixed income and alternatives, he subscribes to the methods of the Yale Endowment and its asset allocation. That means using real assets and alternative strategies alongside traditional asset classes.

“I approach each year expecting at least one market correction, so I make tactical asset allocation adjustments based on seasonal or technical patterns” When it comes to the changing regulatory environment, Nielsen is fully behind anything that improves standards and provides more information for investors. “We have fully embraced the new CRM2 reporting standards and would have liked to see them come into play long ago,” he says. “We still believe that there could be further improvements to both fee disclosure and reporting to clients, and would like to see that openness continue, especially on the fee disclosure side.”

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5/05/2017 4:11:11 AM

BLAINE LENNOX Partner and portfolio manager, institutional and private clients JARISLOWSKY FRASER Years in the industry: 22 Years as a PM: 19 Industry accreditations: CFA, CSC, Canadian Options Course Typical clients: Affluent families and individuals, private and public foundations, universities, family offices

Using a discretionary portfolio manager is only a consideration for a certain segment of the population. Protecting wealth only becomes an issue when you have it, and when you do, expectations tend to be high, explains Blaine Lennox of Jarislowsky Fraser.

“Generally speaking, we are a good fit for individuals and organizations that are interested in a conservative, high-quality investment approach that is designed

“My clients’ needs and goals remain essentially the same – to preserve their wealth so they can sleep at night, ensure their income needs are met and grow their wealth in the long term” to protect capital while generating income and providing real long-term growth,” he says. “The desire to limit losses in down markets, optimize tax efficiency and ensure their portfolios produce an adequate income are the items that are top of mind for our clients currently.”

It’s a lot to take on board, but Lennox has been able to narrow down what being a successful discretionary PM ultimately means.

“My clients’ needs and goals remain essentially the same – to preserve their wealth so they can sleep at night, ensure their income needs are met and grow their wealth in the long term,” he says.

That description holds true no matter the client, but parts of the job do evolve, such as the type of investments a PM can use. In that respect, choice has never been greater. “Investment portfolios have become much more diversified internationally,” Lennox says, “and there is increased interest in solutions that integrate environmental, social and governance [ESG] considerations.”

Looking at the current lay of the land, Lennox believes predictions of a downtown are slightly premature, but he warns that isn’t a call to arms to go on an equity spending spree, as valuations in the markets give him cause for concern. “Our more cautious view is due to the elevated valuations for equities, the unwinding of the extraordinary monetary policy accommodation and rising populist sentiment, all of which contribute to general uncertainty that can cause greater volatility,” he says.

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5/05/2017 4:11:21 AM

FEATURES

COVER STORY: PORTFOLIO MANAGEMENT POWERHOUSES SEAN LASKO Investment counsellor and chair of Investment Committee MANULIFE PRIVATE WEALTH Years in the industry: 15 Years as a PM: 12 Industry accreditations: CFA, CFP Typical clients: Entrepreneurs and professionals; average portfolio size of $4 million

Many portfolio managers cite convincing clients to relinquish control over their personal finances as a major challenge, and Sean Lasko of Manulife Private Wealth is no different. “Wealthy entrepreneurs and professionals have made their wealth by being intimately involved in their businesses and being in

“Investors are certainly demanding a more client-friendly online experience where they can find the information they want to see, when they want to see it” control of the decision-making process,” he says. “For discretionary investment management, the client is being asked to give up that control.”

Not surprisingly, this can be a difficult process, but eventually the merit of having an expert guiding your investment strategy becomes clear. The majority of Lasko’s clients are highly successful in their chosen fields, and many achieved that success by taking risks. When it comes to their portfolios, however, a different mindset takes hold. “Although most of these individuals have experienced high double-digit annual returns on equity within their businesses,” he says, “they are typically quite satisfied with lower returns on their investment portfolios as long as the risks are adequately managed.”

One area where clients’ expectations have changed is with technology – as the world becomes increasingly digital, wealth management isn’t immune to the pressure to evolve. “Investors are certainly demanding a more client-friendly online experience,” Lasko says, “where they can find the information they want to see, when they want to see it.” This means providing a platform where the client can log in and view daily updates on holdings, transactions and performance numbers, as well as access quarterly statements and tax information with the click of a button.

This makes for much more clued-in clients, which in turn means conversations with portfolio managers are a lot less one-sided.

In Lasko’s case, these discussions normally involve him outlining his global approach to investing. “On the fixed-income side, we are lightening up our exposure to global bonds,” he says. “We are focusing on fixed-income securities with shorter maturities and duration, with an overweight tilt to corporate bonds versus governments.”

When it comes to stocks, high valuations in North America mean Lasko has adjusted his portfolio weightings accordingly. In reducing exposure to US stocks, he has shifted toward international markets, mainly in Europe and the Far East. Real estate is another focus, and a great income source in this low-interest-rate era. “We own and operate commercial real estate properties throughout the world valued at over $21 billion,” Lasko says. “These private asset classes exhibit low correlation with public markets and offer stable income to yield-hungry investors.”

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5/05/2017 4:11:38 AM

JULIE CROTHERS Senior vice-president and portfolio manager COLEFORD INVESTMENT MANAGEMENT Years in the industry: 16 Years as a PM: 5 Industry accreditations: MBA Typical clients: Investors with $2 million or more in investable assets

There are many positives of the information age, but one of the negatives is that patience is a virtue not many people are blessed with. This is something that affects portfolio managers almost every day. Julie Crothers at Coleford Investment Management believes impatience can be overcome, however, as long as one other component is present.

“Trust is key for clients,” she says, “but like any other relationship, it takes time to build trust. The big challenge is keeping people focused on the long term, which is challenging when there is volatility and uncertainty in the markets.”

“Trust is key for clients, but like any other relationship, it takes time to build trust The big challenge is keeping people focused on the long term, which is challenging when there is volatility and uncertainty in the markets” While volatility hasn’t been much of an issue in the North American markets this year, uncertainty is still a big factor. But rather than worrying about hypotheticals or trying to read the future, Crothers instead focuses on being prepared for whichever way the markets turn. “At the moment, we have increased our cash positions because of higher valuations in the market,” she says. “We start off with a capital preservation mindset, so the portfolios are built to withstand any sort of market. What we are concerned most about today is valuations being so high.”

Going overweight in US or Canadian stocks brings with it a certain element of risk, which is what a portfolio manager is trying to reduce. The risk-reward balance needs to be constantly evaluated – after all, a client’s future prosperity is at stake. In Crothers’ opinion, this is an area that needs further involvement by the regulators. “As portfolio managers, we are fiduciaries, so that means placing the clients’ interest ahead of our own,” she says. “I would fully support a move to have the same standard across the industry because it would be good for the clients.”

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5/05/2017 4:11:58 AM

FEATURES

COVER STORY: PORTFOLIO MANAGEMENT POWERHOUSES PAUL HARRIS

NORMAN LEVINE

Portfolio manager AVENUE INVESTMENT MANAGEMENT

Managing director PORTFOLIO MANAGEMENT

Years in the industry: 27 Years as a PM: 25 Industry accreditations: CFA Typical clients: Those with a minimum of $1 million in assets

Years in the industry: 41 Years as a PM: 35 Industry accreditations: CFA Typical clients: Those with a minimum of $1 million in assets

For Paul Harris of Avenue Investment Management, there are many other perks of being a portfolio manager than the financial benefits.

“What I really like about what I do is that you can really help people,” he says. “I’m invested alongside my clients because we see this as a pension plan. It is my money, my partners’ money and my employees’ money, all invested alongside our clients’ money.”

Like his chosen profession, his company – and particularly its unique fee structure – is a source of pride for Harris. “One of the things we do here that nobody else in North America does is that if we lose clients’ money in a given year, we cut our fee in half,” he says. “We also have a different fee for equities and fixed income.

There is a bonus structure, so any return above 10%, we take 10% of the excess to a maximum of 1%. So in a year, if we do 18%, we take an extra 80 basis points of fee, but if we do 25%, we will only take an extra 1%.”

Presently celebrating his silver anniversary as a PM, Harris has witnessed his clients’ asset allocations change over the years. He says the typical split is now around 70/30 between stocks and bonds, which reflects the fact that people are living longer and thus need the higher returns equities can provide. However, he

With more than 40 years of investment experience, 35 of which have been spent as a portfolio manager, Norman Levine has seen countless bull and bear markets come and go. For that reason, his investment strategy doesn’t hinge on where the markets may be in six months’ time. Rather, it’s about selecting the right companies, which currently means looking abroad. “We have more money outside of Canada right now because there is more opportunity there,” he says. “The Canadian market is so dominated by financials and resource stocks that there’s not a lot left after that.”

Across the border, stocks retain their allure for Levine, despite their high valuations. The market continues to ascend, but many observers believe that won’t continue for much longer. Such predictions don’t concern Levine too much. “Even though we think US stocks are somewhat overvalued and a correction may be in order, we are not moving out of US stocks,” he says. “We are starting to look more into Europe for value. We don’t invest by industry or by country, only by company wherever we find value.”

When it comes to his selection process for equities, timing is everything for Levine. ‘Buy low and sell high’ sounds pretty simplistic in theory, but in reality it takes a great deal of effort to find undervalued companies with good potential. “A recent example for us would be the French drug company Sanofi, which trades on the NYSE,” he says. “We thought it was undervalued because like most drug companies, it faced a patent cliff where a lot of their drugs had gone off patent.”

The pharmaceutical multinational was in the process of rebuilding its pipeline through new discoveries and acquisition, and Levine was able to buy in at a low point when sentiment was

“Over the years, we have found that having diversification in equities won’t help you, as they generally go in the same direction. The only thing that offsets equity risk is fixed income” stresses that fixed income is still a vital part of any portfolio. “Over the years, we have found that having diversification in equities won’t help you, as they generally go in the same direction,” he says. “The only thing that offsets equity risk is fixed income. In 2008, when the equity market collapsed, the fixed-income market did really well.”

Stocks still make up the bulk of Harris’ holdings, and he undertakes a painstaking process to select companies to invest in. This takes a lot of time, but it’s certainly worth the effort when it comes to long-term returns. “We look at good companies with good balance sheets that have a good dividend yield,” he says.

“We won’t be changing our strategy and probably won’t for many years – we will continue to buy the companies that have a lot of free cash flow that we can use to reinvest in other companies.”

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“We have more money outside of Canada right now because there is more opportunity there. The Canadian market is so dominated by financials and resource stocks that there’s not a lot left after that” poor. Since then, the company’s moves have been reflected in increased stock prices, which has paid off nicely for Levine.

When it comes to finding such opportunities, Levine doesn’t have a magic formula. “It involves using screens to some extent, but for the most part it is lots and lots of reading,” he says. “The most successful people in our business read a lot.”

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5/05/2017 4:12:55 AM

MARK O’REILLY Senior vice-president and portfolio manager RAYMOND JAMES Years in the industry: 25 Years as a PM: 9 Industry accreditations: CA, CPA, CFP Typical clients: Business owners and their families, private institutions

More so than many other professional relationships, the arrangement between a portfolio manager and a client is built on trust. Fiduciary responsibility is the central plank of being a PM, but as Mark O’Reilly of Raymond James outlines, keeping clients on an even keel can be difficult. “They spend more time thinking about risks than thinking about return,” he says. “At the same time, they’re demanding much more convenience and simplicity from us.

I find I’m becoming more like a financial therapist, helping them with their individual financial concerns.”

“I find I’m becoming more like a financial therapist, helping clients with their individual financial concerns” While information on investments has never been more accessible for the general public, that doesn’t mean they necessarily understand the process. It’s an extra consideration for PMs, but in O’Reilly’s view, the job hasn’t changed that much since he started nine years ago. It’s still about protecting capital and generating returns, which he achieves by using what he dubs “skills-based funds” – products that have been deliberately enhanced through design to meet a client’s specific criteria – in his portfolios.

If those returns are generated, then the PM has proven his worth and should be paid accordingly, O’Reilly believes. “The model needs to be tweaked so there is a direct correlation between the portfolio manager’s long-term performance on a client’s portfolio and the PM’s compensation,” he says. “If the client wins, the PM wins.”

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5/05/2017 4:13:06 AM

FEATURES

COVER STORY: PORTFOLIO MANAGEMENT POWERHOUSES DEREK MASSEY

MICHAEL A. PRITTIE

Head of portfolio management HSBC GLOBAL ASSET MANAGEMENT (CANADA)

Senior financial advisor and portfolio manager MANDEVILLE PRIVATE CLIENT

Years in the industry: 24 Years as a PM: 20 Industry accreditations: CFA Typical clients: High-networth private clients

HSBC Global Asset Management, as its name suggests, is an operation with international reach. As Derek Massey explains, this brings certain benefits. “We have investment experts located in 26 countries and territories around the world that evaluate capital markets,” he says.

“Our recent valuation work has led us to take some profits in equities across Canada and globally and redeploy the proceeds to fixed income and cash.”

Massey joined HSBC Global Asset Management in 2014 and currently oversees the private client management team.

As such, he is responsible for HSBC’s distribution channels, as well as communicating strategy internally to staff and externally to clients and the media. When it comes to stocks, that strategy means taking advantage of HSBC’s global

“We seek to invest in the best businesses, but just as important is that we need to pay the right price for that business” footprint to identify the best companies. “Our process is to first evaluate a company, then we evaluate the company as an investment,” he says. “We seek to invest in the best businesses, but just as important is that we need to pay the right price for that business.”

Having started his investment career in 1993, Massey rose through the ranks to become the principal and vice-president at Martin, Lucas & Seagram. There, he managed discretionary portfolios for family groups, charitable foundations, estates and trusts, which led him to his current position with HSBC. The investment climate has changed a great deal since he first broke into the business 24 years ago in terms of the sophistication of clients, the product lineup and regulatory oversight. While this has made the job more challenging, Massey says he welcomes any changes that can improve standards in the profession.

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Years in the industry: 30 Years as a PM: 3.5 Industry accreditations: CFP, CIM, CPCA, FCSI, CIWM Typical clients: Cross-section of business owners, wealthy retirees and high-income earners

Michael Prittie is a portfolio manager at Mandeville Private Client, so it’s not surprising that alternatives are a major part of his investment strategy. Mandeville chairman and CEO Michael LeeChin is a noted disciple of bringing private equity to the masses – a belief Prittie also subscribes to. “Over the last decade, privates/ alternatives have produced some very rewarding benefits for my clients,” he says. “I am fortunate to have access to some worldclass private/alternative solutions that have excellent income and stability, while others are focused on long-term growth.”

The bond markets are another area Prittie is increasingly fond of, given current stock valuations in North America. “Since January, we have been tilting our portfolios towards additional fixed-income investments,” he says. “Where new funds are not available or not sufficient, we are rebalancing – trimming some equity and buying private and public fixed-income solutions.”

This change in strategy comes as the main indices have reached record levels, but Prittie is preparing for stocks to hit a wall in the near future. “While I don’t believe anyone can time the market,” he says, “I feel now is an excellent time to rebalance portfolios back to their original targets – reducing equity and enhancing income – given the equity returns over the past eight years.”

Using a fee-based platform for his clients, Prittie believes recent moves by regulators to increase transparency are a step in the right direction, but that the industry still needs to do more

“While I don’t believe anyone can time the market, I feel now is an excellent time to rebalance portfolios back to their original targets, given the equity returns over the past eight years” to protect the interests of clients. “We need enhancement and further development of CRM2 to not only show what an advisor earns in trailing commissions,” he says, “but to also to show the client how much money is coming out of their pockets, whether through commissions, MERs, sales charges, fee-based costs and/or trustee fees.”

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DARRELL GEBHARDT Senior vice-president and investment advisor NATIONAL BANK FINANCIAL Years in the industry: 20 Years as a PM: 4 Industry accreditations: CIM, CFP, FCSI, FMA Typical clients: Business owners and professionals; average of $750,000 in assets

With a book size of just under $800 million, Darrell Gebhardt has built a practice at National Bank Financial where clients can expect the full wealth management package.

That means investment specialists, as well as an accountant, a lawyer and a risk management specialist, all of whom are part of the staff. Given the assets involved, highnet-worth clients have come to view such service as more of a necessity than a luxury, Gebhardt explains. “A lot of my clients are

“We are advocates of keeping your money boring – the strategies that worked always work. It’s the discipline and emotion that always create the asset bubbles and the panics” business owners, so they appreciate they expertise of the tax planning we do, the investment planning we do,” he says. “A lot of our clients have complicated situations with holdcos and opcos, so we need to incorporate all the estate planning situations that go with that.”

With many of his clients approaching retirement, finding ways to generate income without putting them at unnecessary risk is a major part of Gebhardt’s job. “We are advocates of keeping your money boring – the strategies that worked always work,” he says.

“It’s the discipline and emotion that always create the asset bubbles and the panics.”

Aside from traditional stocks and bonds in his portfolio, Gebhardt likes to use real estate for diversification. Investing in REITs also has very tangible benefits, as he outlines. “Real estate is a core percentage of our portfolio, typically anywhere between 5% and 15%,” he says. “It is industrial and commercial REITs, and we love the cash flow – plus, the return of capital in corporate and nonregistered accounts is the most tax-efficient. It’s a deferred capital gain, so in the right account, it is great cash flow.”

While stocks have performed well in the North American markets so far in 2017, that’s not to say that momentum will continue throughout the rest of the year. Gebhardt certainly sees the potential for volatility, with valuations not matching fundamentals in many sectors. “There is a scenario right now where Tesla has a greater market cap than GM,” he says. “Amazon is larger than Walmart from a market cap standpoint. Snapchat, after losses of $500 million, comes out with an IPO and a $30 billion market cap – twice the size of National Bank. We are definitely erring on the side of caution right now.”

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FEATURES

COVER STORY: PORTFOLIO MANAGEMENT POWERHOUSES LESLIE G. CLIFF Director of private wealth management GENUS CAPITAL MANAGEMENT Years in the industry: 35 Years as a PM: 31 Industry accreditations: CFA Typical clients: Individuals and families of all types

As the director of private wealth management at Genus Capital, Leslie Cliff puts a high priority on retirement planning – and given Canada’s aging population, her expertise in this area is a valuable commodity. A 35-year veteran of the business, Cliff has observed plenty of change in the wealth management industry, and not all necessarily for the better. “The banks have changed,” she says. “They are incredibly aggressive and push their staff hard to find cash in their systems and get that cash invested in some bank product.”

The people seeking her services have also changed; they now have other considerations beyond simply earning returns on their investments. “They are better informed and have lots of options,” Cliff says. “They want their investments to match their personal values – therefore, fossil fuels, tobacco and poorly governed companies are out for some clients.”

As far as her investment strategy for 2017 goes, Cliff believes in proceeding with caution, a position that’s already reflected in her portfolios. “We have

“Clients are better informed and have lots of options. They want their investments to match their personal values” cut back equity positions to a benchmark weight from slightly overweight – we are selling emerging countries and the US to buy in Europe,” she says.

“The low-interest-rate environment has pushed us to higher-yielding stocks and corporate bonds and mortgages.”

On the topic of regulation, Cliff finds common ground with many of the other portfolio managers featured here, specifically in her belief that CRM2 was more of a Band-Aid solution than a true cure.

“Before, clients were very frustrated because they couldn’t find their fees,” she says. “Now they only know about some of their fees, but they are being told all fees are being disclosed, which is sadly not true. It’s disappointing for the industry and a lost opportunity.”

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MARIA DAWES Portfolio manager CAPSTONE ASSET MANAGEMENT Years in the industry: 15 Years as a PM: 6 Industry accreditations: CFP, CIM Typical clients: High-net-worth individuals

Part of BC-based Capstone Asset Management, Maria Dawes is another money manager who’s using alternatives to enhance her portfolios. Ultra-low bond returns have made alternatives an attractive option, but as Dawes explains, they’ll also be beneficial when rates finally rise. “Supplementing fixed income with nontraditional options can help supplement the low rates now,” she says, “as well as provide some protection against the downward pressure in the bond market as rates go up.”

The alternative space provides plenty of options for investors, depending on asset size and risk tolerance. Dawes directs her clients in a number of different directions. “We integrate alternatives such as private debt, factoring, infrastructure and mortgages to provide the best fixed-income portfolio that we can,” she says. “As of March 31, our fixed-income portfolio returned a one-year performance of 6%, versus the iShares DEX Universe Bond

“We integrate alternatives such as private debt, factoring, infrastructure and mortgages to provide the best fixed-income portfolio that we can” Index Fund (XBB) return of 1.1%.”

Being a discretionary portfolio manager requires a deep knowledge of securities markets, but communication skills are equally important – and something Dawes prioritizes.

“As soon as the client’s situation changes, or if they forget the objectives established in the first place,” she says, “if the PM is not there to touch base regularly or to recognize the disconnect, then the client will likely be disappointed and frustrated.”

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FEATURES

COVER STORY: PORTFOLIO MANAGEMENT POWERHOUSES ANDREW KOST Investment counsellor ASSANTE PRIVATE CLIENT (CI PRIVATE COUNSEL) Years in the industry: 25 Years as a PM: 15 Industry accreditations: CFA Typical clients: High-net-worth clients with assets from $2 million to $6 million

A lot can change in 25 years, and that certainly rings true for Andrew Kost when he looks back on his career. “Originally the investment role was about getting the proper information in order to make an informed decision,” he says. “Now it’s more about filtering out the noise and finding what information is material.”

Aside from the misinformation and mixed signals that are a by-product of the digital age, clients have also changed, which means their PMs need to evolve, too. “Most Canadians have some exposure to the investment world,” Kost says. “With the complexity around taxes and constant changes, tax planning has become a more integral part of our conversation. “ That’s especially true when it comes to the high-net-worth segment – when the assets being managed are in the millions, a great deal of care is paramount. “We look at two elements of risk when determining an appropriate risk profile – capacity and willingness,” Kost says. “The investment horizon tends to influence the client’s capacity to take on risk and ride out any volatility. In the high-net-worth space, building a tax-efficient portfolio is an important objective as well.”

When it comes portfolio construction, Kost uses equities, bonds and alternatives, depending on the circumstances. The Fed’s commitment to raising interest rates is one such factor that will influence his strategy going forward. “From a fixed-income perspective,” he says, “our positioning has been defensive since we feel that, in general, monetary easing is coming to an end, and interest rates will likely begin to normalize.”

“In the current market environment, with geopolitical and socioeconomic risks running high, we strongly believe that a broad array of anti-correlated asset classes is necessary to provide real downside protection to client portfolios” For stocks, the strong markets have made finding undervalued companies pretty difficult, so Kost plans on building cash levels until those opportunities present themselves again. In terms of alternatives, he doesn’t chase higher yields; rather, the priority is on providing clients the protection that comes through diversification. “In the current market environment, with geopolitical and socioeconomic risks running high, we strongly believe that a broad array of anti-correlated asset classes is necessary to provide real downside protection to client portfolios,” he says.

When it comes to the wealth management space in general, Kost believes the regulators have the right idea, but the wrong methods.

In his view, more paperwork isn’t something clients will respond positively to. “Account documentation, compliance reporting and client information are getting more and more onerous, having the exact opposite effect of what is aimed for by the regulators,” he says. “Clients are no longer reviewing documents and disclosures due to a lack of time and/or complexity.”

He believes a better solution would be to take a page from the CFA Institute’s book, which compels those who obtain the designation to have a fiduciary duty to act in best interests of the client. This should be the common goal of anyone involved in managing money, Kost says, citing recent scandals that have damaged the reputation of the industry. “If the same principle was applied in the whole financial industry,” he says, “we wouldn’t be running into the aggressive selling problems that some banks are experiencing now.”

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5/05/2017 4:14:11 AM

PEOPLE

PORTFOLIO MANAGER

Trial by fire QV Investors portfolio manager Ian Cooke details the career touchstones that have shaped his investment philosophy

AS STARTS in the business go, Ian Cooke’s was more memorable than most. Having completed his bachelor of commerce degree at the University of Calgary, he was hired by one of the world’s largest conglomerates.

The year was 2001, and his new employer had been named America’s Most Innovative Company by Fortune magazine for the sixth consecutive year, recording revenue of more than US$100 billion. The company in question was Enron, and unless you’ve been living on Mars for the past 16 years, you already know what happens next.

“I was recruited while still in university to work on their gas trading floor,” Cooke says. “That was right at the peak of the company’s share price. The very first day of my career, I was front and centre for the biggest corporate collapse in world history.

That experience ingrained in me the need to read the details of financial statements and not just buy into the notion that a business is good.”

After the debacle of his first investment job, Cooke rebounded with a much more stable and rewarding stint with Calgarybased hedge fund Savoy Capital. While

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Enron taught him to never believe the hype surrounding a company, at Savoy he was able to hone the research due diligence that has become synonymous with QV funds.

QV, which manages $15 billion in assets, is an employee-owned firm and has been a subadvisor to iA Clarington since 1997.

Cooke joined QV in 2006, starting out as a research analyst. He excelled in the role and was chosen to manage the firm’s small-cap funds only two years later – the year of the market meltdown. As with his hiring with Enron, the timing could have been better, but it turned out to be another formative experience as Cooke steered the IA Clarington Canadian Small Cap Fund through the crisis.

“The important thing to note about 2008-2009 is that we didn’t change our investment approach,” Cooke says. “We invest in enduring businesses run by capable and committed people and for an indefinite period of time. In early 2009, we brought the cash levels in the fund down to the lowest level ever. Although there was terrible macro uncertainty, we were seeing value in a lot of high-quality businesses. We

checked our emotions at the door.”

Currently there are 38 companies in the fund. In choosing them, the QV team have a set criteria that has served them and their clients well over the years. It is a point of pride for QV that its fund managers and clients are very much in the same boat from an investment perspective.

“Our team only invests in the funds we manage,” Cooke says. “We think that’s the appropriate alignment in terms of making sure that every good idea we have goes into these funds and we feel all of our decisions along with our clients.”

Cooke’s aim is to identify companies with attractive valuations and strong balance sheets, which can give them potential for better growth prospects than the overall market. Security selection is a dynamic process, and the team is constantly evalu-

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WHO IS IAN COOKE? Education: Graduated in 2001 with a bachelor of commerce degree with distinction from the University of Calgary’s Haskayne School of Business. He is also a CFA charterholder and is a member of the CFA Society.

Tough start: His career got off to an inauspicious start when his first employer, Enron, declared bankruptcy a few months after Cooke was hired.

The company’s revenues had increased by more than 750% over a four-year period, from $13.3 billion in 1996 to $100.8 billion in 2000, before its dramatic collapse in 2001.

Finding a home: Cooke has been with QV Investors for almost 11 years. The firm manages $15.2 billion in assets – $14.4 billion for institutional clients and $800 million for individuals and their families.

ating the portfolios to see if there is room for improvement.

“Every month, we have to defend our portfolios to our investment committee on a risk-management basis,” Cooke says. “That means not just current data, but in the context of our 20-year history. That provides some context on what the strengths and weaknesses of the portfolio are.”

In building these funds, the QV team takes the long view – the average investment period is between four and five years. That approach has served them well, and in 2017 it means having the discipline to wait for more favourable market conditions.

“Right now it is more difficult to find opportunities to invest our clients’ capital in a fashion that generates an acceptable return,”

“In early 2009, we brought the cash levels in the fund down to the lowest level ever. Although there was terrible macro uncertainty, we were seeing value in a lot of high quality businesses.

We checked our emotions at the door” Ian Cooke, QV Investors

In his own words: “It is in our DNA at QV, which stands for ‘Quality Value,’ to not have a conversation about return without talking about risk. From a risk perspective, how we have performed in difficult periods is a valuable service for our clients.”

Cooke says. “Our cash levels have increased, and we’re patiently waiting for opportunities to gain better entry points for the kind of risk-adjusted returns we’re aiming for.”

Information as at March 31, 2017. The information provided herein does not constitute financial, tax or legal advice. Always consult with a qualified advisor prior to making any investment decision. Commentaries are provided by the portfolio manager or subadvisor responsible for the management of the fund’s investment portfolio, as specified in the applicable fund’s prospectus (“portfolio manager”). Statements by the portfolio manager represent their professional opinion, do not necessarily reflect the views of iA Clarington, and should not be relied upon for any other purpose. Information presented should not be considered a recommendation to buy or sell a particular security. Specific securities discussed are for illustrative purposes only.

Mutual funds may purchase and sell securities at any time and securities held by a fund may increase or decrease in value. Past investment performance of a security may not be repeated.

Statements that pertain to the future represent the portfolio manager’s current view regarding future events. Actual future events may differ. iA Clarington does not undertake any obligation to update the information provided herein.

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

Trademarks displayed herein that are not owned by Industrial Alliance Insurance and Financial Services Inc. are the property of and trademarked by the corresponding company and are used for illustrative purposes only. The iA Clarington Funds are managed by IA Clarington Investments Inc. iA Clarington and the iA Clarington logo are trademarks of Industrial Alliance Insurance and Financial Services Inc. and are used under license. Paid for in part by iA Clarington Investments Inc.

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5/05/2017 4:15:26 AM

PEOPLE

ADVISOR PROFILE

The need for clarity Advisor Shelley Johnston wants to see greater definition of what a financial planner offers consumers

CANADA’S ADVISORY business is suffering from an image problem – one that Shelley Johnston of the Investment Planning Counsel is all too aware of. It’s keeping fresh blood away from the industry and driving the average age of the profession ever higher. The recent scandal over TD Bank’s unethical sales tactics didn’t exactly help matters, either.

“I have had some people come in since this news broke, and they wanted to know how independent I was,” Johnston says.

“They wanted to know if I had quotas for selling products. I can tell them I am fully independent and can sell any product across the board.”

Since 2002, Johnston has been with the IPC, where she specializes in meeting the complex needs of Canadians facing retirement. She started her career with Prudential Insurance in the late ’80s. Working at the firm’s head office for more than a decade, she had regular interaction with advisors, which ultimately paved the way for her current career.

After Prudential was acquired by London Life, Johnston moved to the TD Evergreen brokerage, but the experience isn’t something she looks back on with fondness.

“I threw in the towel one day because I was so disgusted,” she says. “When I see what is in the news now with the banks, I just shake my head because this has been going on for years.”

It’s why Johnston believes there needs to be more distinction about what a financial

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advisor actually does. The job in 2017 is a lot more than flogging products, she says, but that’s not something the general public always realizes.

“We need to make what a wealth advisor is and what a financial planner is clearer,” she says. “I am a full-service wealth advisor; I’m not just selling mutual funds. Clients are confused about the different products, the designations and the titles. I am more of a planner, but how we make our money and are compensated is more from the investments and the products we sell. The value-add we bring to the table is the financial and lifestyle planning.”

In the CRM2 era, the cost of financial advice is easier to quantify for clients.

Statements now show in dollars and cents how much an advisor is paid, which makes it easier for clients to discern whether the advisor’s performance merits the compensation. At this point, the increased disclosure requirements haven’t had a negative effect on Johnston’s business.

“So far, we have had a really positive

response,” she says. “Not one client has come to me and said I didn’t deserve my fee, but they do want to know what the fund managers are doing for their dollars.”

Johnston shares that curiosity, and she’s currently in the process of overhauling her investment strategy for this year. With a lot more product options out there, there’s no good reason to stick with underperforming mutual funds, she explains.

“Last year I think some of the Canadian fund managers missed the mark on the Canadian market,” she says. “Typically we have been a traditional mutual fund shop with some stocks, bonds and ETFs, but I’m really looking at changing my product shelf and evolving how we invest our clients’ money going forward.”

Johnston doesn’t want to rush this process – rather, she plans to take stock of the current market and decide how her clients’ needs are best served. Central to that is the idea of value – maximizing returns for the fees paid. Just as advisors are now being held to a higher standard of transparency,

CANADIANS AND RETIREMENT As a registered retirement consultant, a large part of Johnston’s job is helping her clients prepare for life after they finish working. Experts say the average retiree needs 60% to 80% of their pre-retirement income to live comfortably in retirement, although that requirement diminishes as they get older. According to the recently published Manulife Financial Wellness Index, a large number of Canadians are not adequately prepared for their retirement. The study showed that two in five are classified as ‘financially unwell,’ while 83% say they are not ready for retirement.

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FINANCIAL PLANNING FOR SENIORS In addition to her CFP and RRC designations, Johnston is also certified as an elder planning counsellor [EPC], an accreditation issued by the Canadian Initiative for Elder Planning Studies.

It’s a growing niche – according to Statistics Canada, the proportion of the senior population in this country has been increasing steadily over the past 40 years.

From 1971 to 2010, the proportion of seniors in the population grew from 8% to 14%

That proportion is expected to balloon to 23% by 2031, when all baby boomers will have reached age 65

“We need to make what a wealth advisor is and what a financial planner is clearer.

Clients are confused about the different products, the designations and the titles” Johnston would like to see similar moves by the manufacturers.

“I’m not interested in using a flavourof-the-month fund; we have a strict rule in the office that wholesalers cannot come

in unless invited,” she says. “If I want to use a product, I will contact the individual companies if I want to know more. What I am finding out so far is that some are not being upfront about their fees.”

Sometime between now and 2021, the number of seniors will likely exceed the number of children aged 14 and younger for the first time ever

By 2036, the number of seniors could reach between 9.9 and 10.9 million

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5/05/2017 4:16:22 AM

SPECIAL PROMOTIONAL FEATURE

EXEMPT MARKETS

Alternative solutions A more stringent regulatory environment might be causing some headaches across the industry, but there is help out there, thanks to new firm Exempt Edge

THOSE WITHIN the wealth management industry will likely recognize the Exempt Edge name. Previously the title of the trade publication for the National Exempt Markets Association [NEMA], Exempt Edge was reborn in January as a software solutions company. A division of Olympia Financial Group, the new firm is the brainchild of founders Craig Skauge, Stephen Preston, Phil du Heaume and Ken Plumb. Their belief was that the exempt market was not being adequately serviced in terms of back-office solutions. Regulatory and compliance requirements have never been greater, leaving an obvious gap in the market they believed needed to be addressed.

“Some companies have tried to come into this space, but we feel they have fallen short,”

Preston says. “They haven’t really provided our industry with solutions that are specific to the exempt market. It is such a different animal than the mutual fund industry.”

The company’s origin can be traced back to Olympia’s acquisition of two assets: An exempt market back-office system from Raintree Financial Solutions and a CRM2 reporting system from Incapsol. One of the largest exempt market dealers in Canada, Raintree developed the back-office software over a seven-year period alongside Ken Plumb’s PDERAS Consulting Group.

Incapsol, formed jointly by Raintree Financial Solutions and Ken Plumb from PDERAS, developed the CRM2 reporting system. A deal was ultimately signed between the parties; Incapsol retained

“Some companies have tried to come into this space, but we feel they have fallen short. They haven’t really provided our industry with solutions that are specific to the exempt market. It is such a different animal than the mutual fund industry” Stephen Preston, Exempt Edge 50

20% equity in what would later become Exempt Edge.

Plumb and du Heaume worked in concert to build the systems at Raintree, and that relationship will continue on the same foot now that both are at Exempt Edge. The company’s first offering deals with CRM2 reporting, which is timely given the looming compliance deadline. The new reporting standard applies to advisors and dealers across the investment spectrum, but creating something tailored specifically to the exempt market was a priority for the new firm.

“We were really cognizant of the fact that the exempt market needed its own solution, and [we didn’t want to] come up with something that stifles the innovation that each dealer has,” du Heaume says. “They all operate differently, so we had to build something that was flexible enough that everyone

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could use it in a certain way, but also align with what the regulators require through reporting and compliance.”

The offering memorandum exemption rule enacted in 2016 means the private markets are now a lot more accessible to ordinary Canadians. This creates a much larger target market for exempt dealers, but with an increased client base comes greater regulatory burdens. This is where Exempt Edge comes in.

“Retail investors, or non-high-net-worth individuals, never really had access to private investments before,” du Heaume says. “Now if they are looking for diversification for their portfolio, they have access. From an exempt market dealer’s standpoint, there is a lot of responsibility to ensure they are being compliant and giving accurate reporting to their clients.”

The launch of Exempt Edge’s CRM2

product comes ahead of the July 14 deadline for issuing client statements using the new reporting standard. Despite that important date on the horizon, Preston believes many in the industry are ill-prepared. With those advisors in mind, the Exempt Edge system was designed to take most of the legwork out of the process.

“Our clients needed something that was easy to use and wouldn’t take a lot of time to get transaction history and client data into a system and produce statements,” Preston says. “Trying to produce something from scratch through Excel spreadsheets and other programs is a time-consuming and costly task that is prone to errors.”

Another feature of the software is a client portal where investors can easily access their transaction history and see all their past and current statements in one place. Convenience like that is sure to prove popular

with consumers, most of whom now expect a greater level of service from advisors, brokers or dealers.

Exempt Edge is still very much in its formative stages, but with the backing of an industry heavyweight like Olympia Financial, hopes are high for the firm. Its CRM2 offering is the first in a line of products that will be introduced throughout 2017.

“We will be launching a new product each quarter,” Preston says. “First we have Issuer Edge in Q2 for issuers in our space – companies looking to raise money through exempt market dealers. Then we will have MIC Edge in Q3, which is software specifically for mortgage investment corporations.

In Q4 we will have Dealer Edge for exempt market dealers to help them with their back-office compliance, which is a reiteration of the system we acquired from Raintree last year.”

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5/05/2017 4:17:34 AM

SPECIAL PROMOTIONAL FEATURE

CORPORATE DEBT

An alternative on lending Greg Romundt of Centurion Asset Management details how his firm has branched out from its real estate roots to offer investors the opportunity to lend to businesses of all stripes

IN BUSINESS, evolution is necessary for survival. Any company that isn’t able to move with the times will ultimately be left behind, but that isn’t a criticism that can be levelled against Centurion Asset Management. When Greg Romundt founded the firm in 2003, its main focus was the secondary markets in the apartment space. That remains a key part of its portfolios today (Centurion is the largest non-school-affiliated institutional owner of student housing in Canada), but the company has branched out in many different directions, offering investment funds, financing and property management services to a growing list of clients across the country.

“We have really broadened from just one small area of real estate to become a much more broad alternative investment shop,” Romundt says. “We finance the development of new multi-family and student housing on the equity side. We also have a commercial credit department where we lend to different companies.”

While the company has diversified in recent years, the product most people associate with Centurion is its apartment REIT. The properties in the fund are residential and primarily in the GTA, which is a market currently dominating headlines and public discourse. As the price of real estate has exploded in Canada’s largest city, funds with greater exposure in that area have been generating healthy returns. Investors in the

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Centurion Apartment REIT garnered a 9.8% return last year and can expect even better for 2017, according to Romundt.

“I anticipate what is happening in the real estate market to flow much more into the apartment market this year,” he says. “We are already seeing signs that prices in apartment buildings are being dragged up this year – that wouldn’t have been reflected in our 2016 returns, so I think this year will be very strong as well.”

The market in the GTA has become so molten-hot over the past 12 months that the Ontario government saw fit to introduce a number of measures last month in an attempt to cool it off. There is a sharp divide

in public opinion on whether those efforts will have the desired effect or simply make the situation worse. Romundt considers the interference to be a mistake, highlighting the new tax on property speculation as especially misguided.

“Smaller retail investors are a very large proportion of the people who are buying condos,” he says. “For developers, these buildings are massively expensive. The banks require 80% pre-sales before they give the financing to build them. The market really relies on these retail investors to finance the construction of these condos. If those people pull out or buy less, fewer will be built, so how does that help the supply chain at all?”

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CENTURION APARTMENT REIT GROWTH Based on $10,000 invested $24,000

$22,000

End value: $21,615.65

$20,000

$18,000

$16,000

$14,000 $12,000 $10,000 09 9 10 10 10 0 11 -11 11 -11 12 12 12 -12 13 13 13 -13 14 14 14 -14 15 15 15 -15 16 16 16 -16 Aug- Nov-0 Feb- May- Aug- Nov-1 Feb- May Aug- Nov Feb- May- Aug- Nov Feb- May- Aug- Nov Feb- May- Aug- Nov Feb- May- Aug- Nov Feb- May- Aug- Nov

In his opinion, the main cause of escalating prices in the GTA is a lack of supply, which he can gauge simply by looking at the underlying assets in Centurion’s REIT. Faced with annual home price increases of 30% or more, many renters are electing to stay where they are, with obvious implications for supply.

“We have seen turnover rates at apartments buildings decline significantly,” Romundt says. “It used to be that 25% to

30% of residents would move in a normal year – that has dropped by about half, so there are maybe only 15% of people now moving. We have virtually no availability of apartments, as they get snapped up months in advance.”

Aside from its flagship REIT, Centurion also offers two specialized debt funds: Centurion Real Estate Opportunities Trust and Centurion Financial Trust. The former

“On the real estate side, we really are an alternative to the banks, and we thought there was a greater opportunity than just real estate because all borrowers face the same kind of challenges” Greg Romundt, Centurion Asset Management

is for qualified investors with a minimum of $25,000 who are seeking exposure to mortgage and real estate debt. The fund had a 14.14% return in 2016, which was comfortably above the firm’s 7% to 12% target.

Centurion Financial Trust, meanwhile, is the newest addition to the firm’s lineup, launched earlier this year. A corporate debt fund, it also includes exposure to mortgage and real estate debt, and is a product Romundt has high hopes for.

“The banks have pulled back more and more from traditional-type lending,” Romundt says. “On the real estate side, we really are an alternative to the banks, and we thought there was a greater opportunity than just real estate because all borrowers face the same kind of challenges. So we thought that, rather than having just a real-estate-focused debt fund, we would do a broader debt fund that would diversify into other corporate segments as well.”

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5/05/2017 4:18:26 AM

WEALTH PROFESSIONAL AWARDS FINALISTS 2O17

Thursday, June 1 The Liberty Grand | Toronto A record number of nominations came in from across the wealth profession for this year’s Wealth Professional Awards brought to you by Invesco Canada. Here are the best of the best.

Wealth Professional is proud to present the individuals and organizations at the forefront of financial services best practice who have made this year’s list of finalists. Together with our publisher, KMI Publishing & Events, Wealth Professional would like to thank all of those who took the time to submit nominations this year and to all of our sponsors who continue to make this event a success.

We look forward to celebrating your success at The Liberty Grand on Thursday, June 1st 2017. For more information about the event and to book your table, visit www.wpawards.ca.

OFFICIAL PUBLICATION

BROUGHT TO YOU BY

AWARD SPONSORS

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EVENT PARTNER

THE INVESCO CANADA AWARD FOR

LIFETIME ACHIEVEMENT

This award recognizes an individual who has made an outstanding contribution to the industry as a whole through visionary people management strategies and leadership.

Though there are no defined parameters, this award will acknowledge someone with an established history of distinguished service to the industry and who has exhibited leadership and provided inspiration to others in the sector while putting the interests of the industry at the top of their priorities.

THE FUNDSERV AWARD FOR

ADVISOR NETWORK/ BROKERAGE OF THE YEAR

yy Canaccord Genuity Wealth Management yy CIBC Wood Gundy yy HollisWealth yy Investment Planning Counsel yy Investors Group yy Mandeville Private Client yy Manulife Securities

THE EQUISOFT AWARD FOR

FUND PROVIDER OF THE YEAR

yy AGF Investments yy BMO Global Asset Management yy CI Investments yy Fidelity Investments yy Franklin Templeton Investments yy Mackenzie Investments yy Manulife Investments yy RBC Global Asset Management yy Sun Life Global Investments yy TD Asset Management

Winner will be announced on June 1.

AWARD SPONSOR

AWARD SPONSOR

AWARD SPONSOR

THE RADIUS FINANCIAL EDUCATION AWARD FOR SERVICE PROVIDER OF THE YEAR yy Advicent yy Advisor Websites yy Blue ID yy Broadridge Financial Services yy Canadian Securities Institute yy EquiSoft yy Foran Financial Institute yy FundServ yy Iress Market Technology yy Kronos Technologies yy Maximizer CRM Wealth Manager yy NexJ Systems yy Qtrade Financial Group yy Sticky Advisor

AWARD SPONSOR

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5/5/2017 10:32:15 AM

WEALTH PROFESSIONAL AWARDS FINALISTS 2O17 THE FRANKLIN TEMPLETON INVESTMENTS AWARD FOR BEST PRACTICE INDEPENDENT ADVISOR OFFICE (10 STAFF OR MORE)

THE SPROTT ASSET MANAGEMENT AWARD FOR BEST ADVISOR ALTERNATIVE INVESTMENTS

yy De Thomas Wealth Management

yy Arthur Salzer

yy Manulife Securities

yy Davis Zhang

yy Northland Wealth Management yy Polson Bourbonniere Financial of HollisWealth yy The McClelland Financial Group of Assante Capital Management

Northland Wealth Management

Pinnacle Wealth Brokers

yy Eric Roy

Pinnacle Wealth Brokers

yy Ida Khajadourian Richardson GMP

yy Jesse Kaufman

The Seidman Kaufman Group of Richardson GMP

yy Kevin Algajer

BMO Nesbitt Burns

yy Kevin Haakensen

THE NEI INVESTMENTS AWARD FOR

THE MANDEVILLE PRIVATE CLIENT AWARD FOR

yy Alicja Brown

yy AJ Chase

RESPONSIBLE INVESTING

CIBC Wood Gundy

yy Aaron Ruston

Purposed Financial

yy Ross Campbell Assante Capital Management

yy Ryan Colwell

IPC Investment Corporation

yy Seidman Kaufman Group of Richardson GMP yy Stephen Whipp Leede Jones Gable

ADVISOR OF THE YEAR

AJ Chase Financial Group at ScotiaMcLeod

yy Chad Larson

MLD Wealth Management Group of National Bank Financial

yy David Babbitt CIBC Wood Gundy

yy David Little

Little Wealth Management Group of HollisWealth

yy Elie Nour

Nour Private Wealth of Manulife Securities

yy Kyle Richie

Prairie Wealth Management of HollisWealth

Richie Group Wealth Management of Investors Group

yy Bob Thompson

Raymond James Ltd.

yy Mark McNulty McNulty Group of HollisWealth

yy William Vastis The William Vastis Wealth

Management Group of RBC Wealth Management

AWARD SPONSOR

AWARD SPONSOR

AWARD SPONSOR

AWARD SPONSOR

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EVENT PARTNER

THE NATIXIS GLOBAL ASSET MANAGEMENT AWARD FOR

THE HORIZONS ETFS AWARD FOR

THE ISHARES BY BLACKROCK AWARD FOR PORTFOLIO/ DISCRETIONARY MANAGER OF THE YEAR

ADVISOR RISING STAR OF THE YEAR

ETF CHAMPION OF THE YEAR

yy Alexander Massouras

yy Benjamin Waite

yy Arthur Salzer

yy Andrew Oproiu

yy Dan Bortolotti

yy Brian Jones

yy Lakshmi Pillai

yy Guy Lalonde and Christian Lamarre

yy Francis Sabourin

The Alexander Massouras Wealth Management Group Manulife Securities Manulife Securities

yy Rosemary Horwood

Rosemary Horwood Wealth of Richardson GMP

yy Sean Mikucki

National Bank Financial

yy Victor Kuntzevitsky

Your Investment Manager of PEAK Securities PWL Capital

National Bank Financial

yy Shafik Hirani

Aligned Capital Partners

yy Tyler Mordy

Forstrong Global Asset Management

Northland Wealth Management

Northland Wealth Management TD Wealth

Richardson GMP

yy François Têtu

Desjardins Securities

yy Ken MacNeal Richardson GMP

yy Martin-Charles Plouffe

National Bank Financial

yy Neil McIver

Richardson GMP

yy Susyn Wagner CIBC Wood Gundy yy Wolfgang Klein Canaccord Genuity Wealth Management

THE AGF AWARD FOR

ENGAGEMENT, LOYALTY AND CUSTOMER CARE

yy Danielson Group Wealth Management of Assante Capital Management yy David Barnsdale Barnsdale & Hussain Wealth Management Group of RBC Dominion Securities

yy Julia Chung

Spring Financial Planning

yy Kevin Daley TD Wealth

yy Chris Lennox

Lennox Financial Group

yy Melanie Gotts

BMO Nesbitt Burns

yy Rod Tyler

The Tyler Group Financial Services

yy The McClelland Financial Group of Assante Capital Management yy Troy Busniuk Sun Life Financial

AWARD SPONSOR

AWARD SPONSOR

AWARD SPONSOR

AWARD SPONSOR

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5/5/2017 10:32:28 AM

WEALTH PROFESSIONAL AWARDS FINALISTS 2O17 THE EXCEL FUNDS AWARD FOR

OUTSTANDING GLOBAL ADVISOR OF THE YEAR

yy David Esch

The David Esch Wealth Management Group of National Bank Financial Wealth Management

yy Diane Fontaine

RBC Dominion Securities

yy Francis Sabourin Richardson GMP

yy Frencho Rampersaud WealthDejavu

yy Michael Kuzik

RBC Dominion Securities

yy Raymond Choo HollisWealth

yy Stella Ng

Scotia Wealth Management

yy Walter Flores Scotia Wealth Management

THE NATIONAL BANK FINANCIAL AWARD FOR

PHILANTHROPY AND COMMUNITY SERVICE OF THE YEAR yy Aaron Ruston

Purposed Financial

yy Drew Abbott TD Wealth

yy Marita Simbul-Lezon RBC Dominion Securities

yy MLD Wealth Management Group of National Bank Financial yy Nadeem Ibrahim

Educators Financial Group

yy Renee Rebelo

Life Coach Financial Strategies

yy Rob Tétrault

Tétrault Wealth Advisory Group of National Bank Financial

yy Sean Baylis RBC Dominion Securities

THE FIRST TRUST AWARD FOR YOUNG GUN OF THE YEAR

MULTI-SERVICE ADVISOR OF THE YEAR

yy Aaron Hector

yy Andrew Ellis

Doherty & Bryant Financial Strategists of T.E. Wealth

yy Adam Schacter

AWARD SPONSOR

Raymond James

yy Duane Francis

Mandeville Private Client

Mandeville Private Client

yy Benjamin Waite

Your Investment Manager of PEAK Securities

yy Cory Garlock

yy Frank Danielson

Danielson Group Wealth Management of Assante Capital Management

yy Gina Macdonald

TD Wealth Private Investment Advice

Macdonald Shymko & Company

yy George Halkidis

yy James Britton

Richardson GMP

Western Canadian Brokerage Group

yy Jason Pereira

Woodgate Financial at IPC Securities Corporation

yy Millicent Hicks

ScotiaMcLeod of Scotiabank Wealth Management

yy Simon Partington Richardson GMP yy Thomas Cook Affinity Financial Group, Affinity Securities/ Worldsource Securities

AWARD SPONSOR

THE AWARD FOR

yy Janet Baccarani and Jennifer Black DFS Private Wealth

yy Jason Nagel Three60 Wealth & Estate Solutions

yy Lyle Rouleau Rouleau Investment Group of CIBC Wood Gundy

AWARD SPONSOR

First Trust

Portfolios Canada

®

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EVENT PARTNER

THE AWARD FOR BDM/

THE AWARD FOR BEST PRACTICE INDEPENDENT ADVISOR OFFICE

THE AWARD FOR

THE AWARD FOR

DIGITAL INNOVATION AND MARKETING

ADVERTISING CAMPAIGN OF THE YEAR

yy Tina Tehranchian Team of Assante Capital Management

yy BMO Global Asset Management

yy Fidelity Investments

yy Darren Gazdag

yy Caring For Clients

yy Dan Bortolotti

yy iA Clarington Investments

yy Harry Cheung

yy Danielson Group Wealth Management of Assante Wealth Management

yy Great-West Life

yy Invesco Canada

yy Insurance For Children (IFC)

yy Mackenzie Investments

WHOLESALER OF THE YEAR

yy Alain Desbiens BMO Global Asset Management

Excel Funds Management Dynamic Funds

yy Jeff Gibbons Invesco Canada

yy Philip Douglas Horizons ETFs Management

yy Warren Miles-Pickup Sun Life Financial

yy Zachary Sikorski Sun Life Financial

(FEWER THAN 10 STAFF)

yy Family Tree Wealth Management of IPC Securities Corporation yy The Lance Howard Group of IPC Investment Corporation yy Little Wealth Management Group of HollisWealth yy Lysnes Magreehan Wealth Management of Canaccord Genuity Wealth Management

BMO Canadian ETF Dashboard Canadian Couch Potato HelloLife Program

yy New School of Finance yy Provisus Wealth Management Transcend Program

yy Royal Bank of Canada yy Sun Life Global Investments

“Meet Will Danoff”

“Overcome Income Inertia” “Do you have access?”

“Innovation Matters”

yy RBC Global Asset Management “Why Choose”

yy Sprott Asset Management

“Bonds Are Broken”

yy Vanguard Canada “We’re In It Together”

yy Richie Group Private Wealth Management of Investors Group yy Western Canadian Brokerage Group

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5/5/2017 10:32:36 AM

FEATURES

SECTOR FOCUS: RESPONSIBLE INVESTING

Responsible investing for the future More and more investors are incorporating environmental, social and corporate governance factors when constructing their portfolios, but does that mean compromising returns?

IN THE PAST, ethical investing might have been considered a niche interest, but that’s not how things stand today. Currently, ethical investing is merely a subset of the larger responsible investing [RI] framework, and RI is big money in 2017. According to the 2016 Canadian Responsible Investment Trends Report, there are $1.5 trillion worth of RI assets under management. This represents growth of 49% in two years, which means responsible investing now accounts for 38% of the Canadian investment industry.

If investing and a clear conscience were considered mutually exclusive at one time, that’s clearly no longer the case. The RI sector now includes ethical, socially responsible, sustainable, green, community,

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mission-based and impact investing, which is a lot to consider when building client portfolios. It’s not surprising, then, that the CFA Institute has added environmental, social and governance [ESG] training to its program.

In a recent study, “Environmental, Social and Governance Issues in Investing: A Guide for Investment Professionals,” authors Usman Hayat and Matt Orsagh analyzed some of the challenges of applying ESG metrics to a portfolio. They identified six methods that investors use, often in concert, to bring ESG considerations into their decision-making: exclusionary screening, best-in-class selection, thematic investing, active ownership, impact investing and ESG integration. The

study showed that while ESG issues such as the employee turnover at a company can be measured, it can be difficult to assign a monetary value to that issue. For that reason, many major firms now have staff dedicated to ensuring ESG standards are being upheld, and investment managers are creating specialized funds dedicated to this segment.

Until recently, ESG has been a focus mainly for listed equities, but it is a sign of the segment’s growth that ESG is now expanding into the fixed-income realm with bonds, too. The demand for responsible investments has exploded both in Canada and across the globe in recent years, but this growth is only the thin end of the wedge when it comes to RI’s future prospects.

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Strength in numbers The Responsible Investment Association’s membership ranges from Big Six banks to individual advisors – all with a common focus on ESG AS RESPONSIBLE investing has ballooned in size and scope across Canada, so too has the purview of the Responsible Investment Association [RIA]. The group’s membership includes mutual fund companies, asset managers, advisors, consultants, investment research firms and asset owners such as foundations and endowments. It’s a diverse mix, but all are in agreement that using ESG criteria for investments can provide superior riskadjusted returns along with a positive societal impact.

The 2016 Canadian Responsible Investment Trends Report showed that individual investors’ RI assets increased by 91% over the past two years, while pension fund assets, which make up three-quarters of RI growth, have risen by $374 billion (or 45%) over the same period.

While responsible investing has become a hot topic recently, the RIA actually dates back to 1989, when it was founded as the Social Investment Organization. The group was rebranded in 2013, just as this segment really started to take flight.

“Our membership has almost doubled in the past four years,” says Dustyn Lanz, the RIA’s chief operating officer. “Part of the reason for that is the growing business case for responsible investing. It is not just about values or ethics anymore. Now it is also about enhancing long-term shareholder value.”

The RIA studies in great detail why people are increasingly drawn to investing using ESG factors – and they’ve found that the motivations are pretty similar to those of any other investor seeking returns.

“Our recent survey of institutional investors and asset managers found that

the top three motivations for choosing responsible investment were to minimize risk, to improve returns over time and to fulfil fiduciary duty,” Lanz says. “I think 20 years ago, those responses would have been very different.”

This segment has changed considerably since the turn of the millennium. The concepts of socially responsible or green investing have been around for a long time, but the process has become more finely tuned and more conducive to achieving solid returns.

2017 doesn’t necessarily mean blacklisting entire industries; rather, it’s about seeking out the companies that are effecting positive change.

“Like any sector, there are leaders and laggards,” he explains. “Some of the extractive companies are really stepping up. In 2016, NEI Investments submitted a proposal for Suncor to regularly report on how it is assessing its future in a low-carbon world. NEI also called for Suncor’s emissions reductions and energy diversification strategies. That proposal had 98% support

“[There is a] growing business case for responsible investing. It is not just about values or ethics anymore. Now it is also about enhancing long-term shareholder value” Dustyn Lanz, Responsible Investing Association “The classic responsible investment strategy in the ’80s and ’90s would have been exclusion,” Lanz says. “Now we are seeing a greater focus on active ownership and positive screening. Using a best-in-class approach, you can look at any sector and find ESG leaders – they would be considered for inclusion in a responsible portfolio.”

In the past, exclusion would almost certainly have meant cutting out many of the major energy or mining companies.

That’s especially problematic in Canada, where those sectors make up a significant part of both the economy and the equity markets. As Lanz explains, however, RI in

at Suncor’s AGM, so that set a new bar for the Canadian oil & gas industry.”

The other major component of the Canadian economy is the financial sector, which is also making great strides on ESG, both in terms of the makeup of the institutions themselves, as well as the products they offer investors.

“There are more thematic strategies and thematic products, like low-carbon or fossilfuel-free products, as well as funds focusing on environmental sustainability or social issues like women in leadership,” Lanz says, “although most responsible investment funds take E, S and G factors into account.”

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FEATURES

SECTOR FOCUS: RESPONSIBLE INVESTING

Reducing risk through SRI The portfolio managers for the IA Clarington Inhance SRI funds discuss the intricacies of building a responsible investment fund AS INVESTORS have become increasingly interested in responsible investing, mutual fund companies have responded with a wide range of options. One line of funds with a particularly strong commitment to ESG factors is the IA Clarington Inhance SRI suite. The funds were launched by Vancity Investment Management [VCIM] in 2005 and acquired by iA in 2009; VCIM has remained the subadvisor for the portfolios.

VCIM portfolio managers Andrew Simpson, Dermot Foley and Jeff Lew oversee the IA Clarington Inhance Bond SRI Fund, the IA Clarington Inhance Monthly Income SRI Fund, the IA Clarington Inhance Canadian Equity SRI Class and the IA Clarington Inhance Global Equity SRI Class.

The team is passionate about the merits of these funds and how ESG can make for better portfolio construction.

“We have consistently had an integrated approach, combining fundamental investment

analysis with ESG analysis,” Simpson says. “We think we are one of the few portfolio managers approaching portfolio construction this way.”

Of the team, Foley has been involved from the very beginning and is responsible for ESG oversight for companies in the funds. In that time, he has witnessed responsible investing grow markedly, which he attributes in large part to the introduction of institutional money.

“Over time, we had the development of the UN Principles for Responsible Investment, which brought the subject to the attention of many more pension funds and institutional investors,” he says.

As large investors have become more attuned to RI concerns, public companies have come to see the importance of improving their ESG metrics.

“We apply ESG analysis to all the companies we invest in,” Foley says. “This includes examining their environmental performance and policies. Most companies

CLIMATE RISK MANAGEMENT IN IA CLARINGTON INHANCE SRI FUNDS

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Fund

Renewables and clean tech

Oil & gas producers

IA Clarington Inhance Global Equity SRI Class

14.9%

0.0%

IA Clarington Inhance Monthly Income SRI Fund

10.7%

6.3%

IA Clarington Inhance Canadian Equity SRI Class

4.0%

7.6%

Combined funds weighted average

11.0%

4.6%

now have some form of environmental policy, whether it is a bank, an insurance company, a mining company or an auto manufacturer.”

Social and governance factors are equally important – and in the age of the internet, they’re both easy for RI-conscious investors to keep track of.

“For corporate governance, we look at companies that have a majority of independent directors on their board, separate the roles of chair and CEO, and have a whistleblower program in place – the things that will ensure shareholders’ interests are protected,” Foley says. “For the social component, we look at how companies treat their employees and the communities they operate in.”

Using ESG to select firms for the IA Clarington Inhance SRI funds requires a great deal of research, but this effort will likely be rewarded – especially with companies still in their formative stages, where the rewards are potentially much greater.

“On the environmental side, we would look at a company like Xylem,” Foley says.

“They manufacture clean water technology, pumps that are used to mitigate damage after floods or natural disasters, as well as doing environmental cleanup. Not only are they adding to the production of clean water, they

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are reducing the energy use that goes into transporting and processing water.”

Xylem certainly satisfies the environmental side of ESG, but there is more to take into account than just its green credentials. Critical to any investment is the return, and the company doesn’t disappoint in this respect either, Simpson says.

“When you think of the water infrastructure needs in North America, this is a company that is well placed to participate in the rebuilding that is going to take place over the next couple of decades,” he says. “There are billions of dollars of water transport infrastructure that need to be dealt with. This is a company we forecast to have a pretty optimistic earnings outlook.”

The most recent addition to the VCIM team is Lew, who joined last year to manage the IA Clarington Inhance Bond SRI Fund.

This offering is one of the few fossil-fuelfree bond funds in Canada, and part of the burgeoning SRI fixed-income space.

“It is a Canadian core-plus mandate, so it isn’t just corporates – there are federal, provincial and municipal offerings too,” Lew says.

“We have added two provincial green bonds, one from the province of Ontario and one from Quebec. We intend to grow the total green weighting over time, potentially looking

“We have consistently had an integrated approach, combining fundamental investment analysis with ESG analysis.

We think we are one of the few portfolio managers approaching portfolio construction this way” Andrew Simpson, Vancity Investment Management outside of Canada as well.”

The selection process for the IA Clarington Inhance SRI funds is comprehensive. One of the first steps Simpson, Foley and Lew take is to exclude businesses that trade in tobacco, nuclear power, military weapons, adult entertainment or gambling. These aren’t small industries by any means, but now that ESG is increasing in importance for almost all companies, the VCIM team has plenty of options for diversifying the funds’ portfolios.

“One of the biggest positions in the Canadian portfolio is New Flyer Industries,” Simpson says. “They are one of the top three transit manufacturers in the world and very much fit with our climate strategy for low-carbon exposure. We have a broad-based

climate risk strategy that we apply to all our funds – our global portfolio and bond funds are both fossil-free.”

Information as at March 31, 2017. The information provided herein does not constitute financial, tax or legal advice. Always consult with a qualified advisor prior to making any investment decision. Commentaries are provided by the portfolio manager or subadvisor responsible for the management of the fund’s investment portfolio, as specified in the applicable fund’s prospectus (“portfolio manager”). Statements by the portfolio manager represent their professional opinion, do not necessarily reflect the views of iA Clarington, and should not be relied upon for any other purpose. Information presented should not be considered a recommendation to buy or sell a particular security. Specific securities discussed are for illustrative purposes only.

Mutual funds may purchase and sell securities at any time and securities held by a fund may increase or decrease in value. Past investment performance of a security may not be repeated.

Statements that pertain to the future represent the portfolio manager’s current view regarding future events. Actual future events may differ. iA Clarington does not undertake any obligation to update the information provided herein.

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

Trademarks displayed herein that are not owned by Industrial Alliance Insurance and Financial Services Inc. are the property of and trademarked by the corresponding company and are used for illustrative purposes only. The iA Clarington Funds are managed by IA Clarington Investments Inc. iA Clarington and the iA Clarington logo are trademarks of Industrial Alliance Insurance and Financial Services Inc. and are used under license. Paid for in part by iA Clarington Investments Inc.

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FEATURES

SECTOR FOCUS: RESPONSIBLE INVESTING

An institutional approach to ESG Addenda Capital has put an emphasis on sustainability considerations in the construction of its portfolios IN 2015, the United Nations adopted its Sustainable Development Goals in an attempt to safeguard the future of the planet.

The 17 goals were to be enacted by 2030 and focused on such areas as clean energy, food security, telecommunications, transportation, water, sanitation, health and education.

Progress of this kind won’t come without investment, however, and the UN Conference

investing in Canada. Addenda made its name as an institutional investment manager for insurance companies, pension funds, foundations and endowments, and its clients can call on dedicated Canadian equity, US equity, international equity, fixed income and commercial mortgage teams.

As subadvisor to the NEI Ethical International Equity Fund, Addenda

“We see it in our research that these [ESG] issues impact investment performance. So we decided not to launch a separate line of products, but actually say that this should be in all of our products and for all our clients” Brian Minns, Addenda Capital on Trade and Development estimates that between US$5 trillion and US$7 trillion of capital investment will be required annually to achieve the goals by 2030. That means there are a lot of projects and a lot of potential investments out there for those who prioritize environmental, social and governance considerations in their portfolios.

Montreal-based investment manager Addenda Capital has positioned itself at the forefront of responsible/sustainable

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Capital has ESG issues tightly knit into its investment analysis and decisionmaking process. The importance of ESG led Addenda to create a sustainable investing team in 2011, starting with the hiring of Brian Minns. Previously an analyst with the Canada Pension Plan Investment Board, Minns explains the expectations for him when he came on board five years ago.

“There were discussions within the firm that they wanted to adopt a more explicit

approach to ESG issues,” he says. “They saw that these issues were becoming increasingly important to our clients and investment returns. One of our largest clients is The Co-operators Group, and they are particularly interested in sustainability.”

Addenda made its name as an institutional investment manager for insurance companies, pension funds, foundations and endowments, and its clients can call on dedicated Canadian equity, US equity, international equity, fixed income, and commercial mortgage teams.

Institutional and high-net-worth clients bring significant assets to the table, so creating and managing portfolios to service them is a delicate and highly skilled process.

In 2017, ESG is another caveat this level of investor will often add, so Minns works closely with the firm’s portfolio managers when creating strategy, which is then integrated into the full lineup of products.

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SUSTAINABLE INVESTING PRACTICES AT ADDENDA CAPITAL Global financial markets

Investment universe

Portfolios

Solutions for custom objectives/restrictions

SCREENING AND IMPACT INVESTING

STEWARDSHIP

ESG INTEGRATION

PROMOTING SUSTAINABLE FINANCIAL MARKETS

“We see it in our research that these environmental, social and governance issues impact investment performance,” he says.

“So we decided not to launch a separate line of products, but actually say that this should be in all of our products and for all our clients.”

Having earned his master’s degree in environmental science at York University, Minns has long had a focus on green issues.

The energy sector is dominant in Canada, but it’s an industry that’s currently in flux as renewables take a larger slice of the pie and fossil fuels diminish in influence.

“We continuously revisit our view on the oil companies,” Minns says, “not just on carbon costs and what that means for companies year-over-year, but oil demand over the longer term. We are working on a scenario now with much lower oil demand and what that means for investing in energy.”

On the social side, the internet is a great

resource to identify which companies lag behind – and that applies to both workers and consumers, as Minns explains.

“If you look at websites like Glassdoor, you can see what the perception of employees is and how they rate the company and management,” he says. “It is difficult to build that directly into our models, but it can help validate some of our assumptions.”

More detailed analysis can come through the variety of customer satisfaction reports that are released each year, particularly with larger entities.

“With the banks we invest in, we can cross-check our assumptions on the growth rate for retail banking in terms of deposits against the annual rankings for customer service,” Minns says. “That’s to make sure we are not widely divergent with our expectations on deposit growth with a bank.”

For governance, Addenda takes a proactive approach to ensure the stocks

and bonds used in its portfolios are from companies with a healthy corporate climate.

“We are always keeping an eye on corporate governance and remuneration,” Minns says. “We reach out to companies around proxy voting season to get clarification on what we believe are best practices.”

Working with the CPPIB, a mammoth organization with close to $300 billion in assets, meant Minns was analyzing the impact of ESG on investment strategy before it became the industry norm. Now that he’s with Addenda, ESG is his primary focus as the firm repositions itself as a leader in the space.

“Our approach is not to screen things out because we think they are bad,” he says.

“It’s about having a better understanding of the ESG issues that might impact investment performance over the long term. It’s about opening our eyes to a wider view of the world.”

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FEATURES

RECRUITMENT

Balancing data and gut instincts in hiring decisions 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-

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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, coaching and personal branding of executives. Her book, Hire Love: How to Hire Passionate People to Make Greater Profit, is now available through Amazon.

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FEATURES

NETWORKING

The power of the tribe Recognizing and realizing the value of business networks is crucial, writes entrepreneur and networker Janine Garner

IN THIS incredibly fast-paced business and economic landscape, we can no longer do it alone – realistically, we never could; we just thought we could. Building a powerful and diverse network, your own personal tribe, is a critical must-have within the new operating system of commercial collaboration. Moving from the isolated ‘me’ space to the collaborative ‘we’ space will future-proof careers, leadership and your own personal success.

A powerful and diverse network drives your success by: creating new opportunity for growth stretching, pushing, driving and inspiring you enabling you to contribute and influence more and leverage your position further This ‘we’ space of commercial collabora-

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tion requires courage, confidence and bravery, and is one in which networks of connected individuals, communities and businesses work together to drive success. We can bring our skills, strengths and talents to the table and together amplify and share expertise to create progressive, results-oriented solutions.

Collective intelligence means we work smarter and quicker together. In fact, diversity and difference of opinion are actually the new competitive advantage.

Networking, connecting, meeting, doing coffee, lunch dates and even speed-connecting – all these terms are synonymous with meeting others to drive skill sets, contacts and ongoing business and personal growth. And however much you might want to hide under

the white tablecloths of a corporate breakfast, powerful and effective networking has evolved and is now a business must for all who want to forge ahead. It’s not simply about building up a Rolodex of business cards (or, more accurately, a smartphone full of virtual ones), a mass of LinkedIn contacts or a significant number of social media followers. It’s about a true meeting of minds and skill sets, and skilfully parlaying said meetings into successful long-range relationships.

Networking is a must-have for successful collaboration, and the diversity of that network is the tipping point between average connections and those that collaborate to create magic. The cross-fertilization of connections, skills and brainpower, and the ideas that are

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openly discussed and shared through network creation, in their turn create new opportunities, innovation and new solutions to existing problems. It’s a domino effect – the way your initial networks interact provides a guideline for the subsequent networks that spring up from these collaborations. They will only benefit from your experience and way of working together.

Building your network The most innovative businesses and organizations are finding that effective and powerful networking is giving them an edge. So how do you find, build and manage a diverse network? How do you gain entry to a true circle of excellence that will work with you and not against you?

The critical element of a powerful network that can become your lifeline, and an absolute must-have for successful collaboration, is diversity. Building an effective and powerful network is so much more than finding a safe, like-minded tribe. It requires diversity, a width and breadth of contacts, a willingness to embrace the opportunity that exists in differences, and finally, an understanding that you may not always agree with or understand certain points of view, but that through the connection, you will build awareness and knowledge.

An effective network is a diverse network that consists of people who differ in expertise, age, gender and experience.

Powerful networks are those that are cross-functional and cross-industry. Think about it: a like-minded network limits the breadth of conversation. Lawyers sit in a room with lawyers, sharing their legal experience. CEOs play golf with CEOs; fashion industry PR experts mingle with other fashion industry PR experts. Now imagine the color of the conversation if instead you had lawyers, accountants, creatives, athletes, marketers and business owners discussing the various solutions to a problem. Imagine the different perspectives shared, the varying insights, the depth of conversation that would stretch thinking and push perspectives wider.

Diverse connections challenge thinking, drive further questions, push boundaries, increase awareness and open our eyes to another way. They also bring to the forefront

opportunities that were previously not in your direct line of vision, present solutions that weren’t on your radar and create innovations that you once thought were not possible.

Who do you need to surround yourself with to inspire you and your business to achieve more? As Jim Rohn said, “You are the average of the five people you spend the most time with”.

A powerful network is one that consists of people who have similar mindsets but diverse experience and will stretch thinking and push boundaries. Furthermore, those within a powerful network realize the power of sharing

ness similarities or ethical focus, or a desire to advance the same cause – and expecting nothing in return – this creates a fantastic opportunity for collaborative relationships, and also for a true value exchange, where ‘What’s in it for me?’ turns into ‘What can I do for you?’.

The ‘we’ space is not a pipe dream. There are businesses and leaders who are clearly succeeding by operating within this framework. It is the center of discussion among academics, thought leaders and consulting groups. Those corporations and entrepreneurs who are using the space well are seeing procedures streamlined, the bottom line coming up,

Building an effective and powerful network is so much more than finding a safe, like-minded tribe. It requires a willingness to embrace the opportunity that exists in differences ideas and of coming together, and value-add to each other’s businesses through the power of plural perspectives.

Those who are willing to be a part of a collaborative working environment are doing so because they want to be challenged. They want the opportunity to constantly learn from others and to share what they’ve learned, to engage on an intellectually challenging level with like-minded thinkers, to see their own business benefit from the knowledge of specialists, and to be happy knowing that they are on the edge of technological advancement, constantly pushing the ‘what if ’ button – because, as a team, they feel secure enough to take risks.

Harnessing the network’s power The concept of commercial collaboration is not for the faint-hearted; it’s for those who can see the far-reaching benefits of what the ‘we’ space is about – and yes, it is a gradual move that involves challenging thinking. But it is not something that one has to contemplate in solitude.

Understanding the power of your network and using its potential is intrinsic to the ‘we’ mentality. To care about the well-being of those who are connected to you through busi-

and employees becoming more engaged and happier. Their ‘communities’ are becoming communities without the quotation marks.

It is not enough, in the words of Sheryl Sandberg, to ‘lean in’ to future-proof our success, our businesses and our careers. For leaders who are taking teams into an uncertain future, it’s now about leaning out and collaborating with others. Because to lean out means to embrace and engage on an unforeseen aggregated level – where thinking bigger than ever before will bring rewards to a collective commercial mind.

The barriers between genders, between generations, between cultures, between the inventors and the investors, between the change-makers, the visionaries and those that make it happen – these all have to be broken down.

This is all a part of the evolution of ‘me to ‘we.’ This is all a part of collaborative business. This is not about a revolution; it’s about evolution.

Janine Garner is the founder and CEO of LBDGroup and works with senior leaders to build high-performing teams. She is also the author of It’s Who You Know .

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PEOPLE

CAREER PATH

BRIDGING THE DIVIDE

Client: Radius Financial Education Contact: Tony Sanfelice

Ever since his humble beginnings in the industry, Rod Tyler has placed Phone: 416.407.1445 great importance on educating others on the value investing Email: of sanfelice@radiusfi nancialeducation.com Publication: Wealth Professional

Tyler’s beginnings in small-town Saskatchewan were characterized by shadowing his father, who worked for the Saskatchewan Wheat Pool, and picking up on his people techniques “My dad had an ability to listen carefully to people’s challenges. Farmers would come to him, often under duress, and he would talk to them like a therapist. People knew when they came to him, he would give them a fair trade and offer a fatherly guidance – I mirrored that”

Ad Size: Full page 8.25” x 10.875”

1950s

GROWS UP ON THE PRAIRIES

1972

MAKES THE LEAP INTO BUSINESS The high prices in Leaf Rapids exhausted Tyler’s scholarship quickly, so he seized an unexpected opportunity to pay the debts of a bankrupt truck-leasing company in exchange for ownership “I met with a high-priced lawyer in Winnipeg and signed a form saying that I would pay the [debts], and I don’t have any money. I went to a hotel and sat down and started crying. It taught me an incredibly valuable lesson: When you take action, you fix what needs fixing”

1982

CEMENTS HIS INVESTMENT PHILOSOPHY Getting his firm off the ground in a climate of double-digit inflation in the early ’80s gave Tyler a sense of perspective that he still relies on today “I understood from the inflationary environment that the most important thing is not your principal; it’s income. The only way I could serve clients was by offering an investment fund capable of generating returns. Short-term fluctuations are of no concern if you have a long-term horizon. I still think that, 40 years later. It was obvious to me that if you were going to accumulate money, you had to put it to work. And nothing’s changed”

2011

WINS A PRESTIGIOUS AWARD In 2011, the Financial Planning Standards Council named Tyler a Fellow of FPSC Distinction, an honour with such strict criteria and such a stringent evaluation process that some years it’s not awarded “The fellowship is recognition by your peers; I’m appreciative of that. I felt humbled by the honour, and it’s another opportunity to give back”

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1967 File due date: Monday, April 24, 2017

date: Mmay HEADSIssue NORTH Art Director: Vic Finucci Bored at university, Tyler volunteered for the Company of Young Canadians,Phone: where he(416) taught605-7729 basic literacy skills to native peoples in theEmail: far north.finucci@radiusfi This led to yearsnancialeducation.com studying for a master’s degree in the northern Manitoba town of Leaf Rapids “Teaching, if it’s done well, is exceedingly demanding. That experience of trying to bridge the gap – not just of skills, but the social divide – has stayed with me. I sought purpose in life; without purpose, it’s hard to get excited”

1978

CREATES HIS OWN REALITY While planning to relocate back South, Tyler realized his skill set was transferable to financial services, so he began taking coursework for two years before he moved, laying the groundwork for the founding of The Tyler Group

“Running a business told me who I was – I would never fit into a large bureaucracy.

As a matter of self-preservation, I had to create my own reality. I am a strong voice for those who crave independence” 2004

JOINS PEAK INVESTMENT SERVICES A change in management at his existing firm prompted Tyler to join Peak Investment Services as an advisor “Peak Investment Services gives advisors the right to maintain the ownership of this business and offer legitimate solutions. It’s like a neural network – we decide things collectively. Everyone who has come to Peak has come of their own volition. Peak doesn’t have sales awards; it’s looking for great advisors and great businesspeople, so it’s the perfect place to work”

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PEOPLE

OTHER LIFE

THE CYCLE LIFE In the evenings, there’s no place Gordon Ross would rather be than on two wheels

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

FOR GORDON ROSS, a portfolio manager at Bellwether Investment Management, the week isn’t complete without at least eight hours in the saddle of a bike. But then, Ross’s yearly schedule includes 34km-long touring rides from Swartz Bay to Victoria and back, as well as the 145-km Tour de Victoria and the 122-km GranFondo from Vancouver to Whistler.

The freedom cycling provides is a compelling lure for Ross, as is the opportunity to continuously get better (he took weekly clinics last summer to develop his technique). “I’m a compul-

30

Years Ross has been a devoted cyclist

72

sive optimizer,” he says. “You can always find ways to improve.”

A dedicated athlete who had already pursued running, squash and skiing but opted for cycling to prevent damage to his knees, Ross says his happiest moment as a cyclist came when a transit strike in the mid-’90s forced him to become a bike commuter.

“It was just wonderful – I would be in vacation mode until about a block from work,” he says. “At the end of the day, as soon as I changed [into cycling clothes], it was like I was on vacation again.”

5,174

Total kilometres Ross biked in 2016, as recorded on social media

4

Bikes Ross has owned during his time as a cyclist

www.wealthprofessional.ca

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