Wealth Professional 5.07

WWW.WEALTHPROFESSIONAL.CA ISSUE 5.07 | $12.95

2017

CERTIFICATION

SURVEY Advisors reveal which designations will really boost your business

BDMs ON PRODUCT TRENDS

Where do Canada’s leading wholesalers think the industry is headed?

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ONE-ON-ONE WITH DAVID LITTLE

WPC’s Lifetime Achievement Award winner reflects on three decades in the industry

ADVISORS’ BIGGEST WORRIES

From compliance to job security, advisors come clean on their top concerns

31/08/2017 9:49:58 AM

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ISSUE 5.07

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

CONTENTS

26 CERTIFICATION

SURVEY 2017

@WealthProCA facebook.com/WealthProCA

UPFRONT 02 Editorial

How does Canada rank for retirement security?

46

04 Head to head

ADVISOR PROFILE

08 News analysis

Advisors weigh in on the CRM2 effect

06 Statistics

After a mass exodus in 2016, hedge funds are back on top

PEOPLE

If specialization is the wave of the future for advisors, Mark McNulty is on the leading edge

48

CERTIFICATION SURVEY 2017 Which designations are essential, and which are just hype?

WPC’s third annual Certification Survey reveals what advisors really think

PEOPLE

INDUSTRY ICON David Little of Little Wealth Management discusses how his steadfast investment philosophy has led to three decades of success

22

10 Intelligence

This month’s big movers and shakers

12 ETF update

BlackRock takes advantage of rising interest rates with five new portfolios

CANADA’S LEADING

SPECIAL REPORT

Will Home Capital’s shareholders welcome additional investment from Warren Buffett?

BDMs WHOLESALERS

AND

FEATURES

BDMs AND WHOLESALERS

Nine top professionals weigh in on how product trends and advisor relationships are evolving in 2017

14 Alternative investment update

Trez Capital offers investors lucrative returns through alternative mortgages

16 Life insurance update

The Sears Canada saga prompts calls for pension protection

18 Health insurance update Canada’s health system gets a failing grade

20 Opinion

Why it’s time to raise the bar on education for advisors

PEOPLE

58

FEATURES

AUTONOMY A PRIORITY

A new poll highlights independence, compliance and job security as advisors’ top concerns

62 Career path

For Gerry Ramos, there’s no greater calling than education

64 Other life

Back in the saddle with dressage expert Jaclyn Morris

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

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31/08/2017 10:16:25 AM

UPFRONT

EDITORIAL

Is Canada ready for retirement?

T

he fact that Canada is undergoing a significant demographic shift isn’t news to financial advisors. The country is clearly greying, but are Canadians preparing adequately for retirement? According to the recently published Natixis Global Asset Management Global Retirement Index, the answer is “kind of.”

While far from the worst country for retirement security, Canada lags behind the likes of Norway, Switzerland, Iceland, Sweden and New Zealand. Those top five nations scored highly in the key factors that drive retirement security worldwide – material well-being, quality of life, finances in retirement and health.

Overall, Canada came in 11th place, with low scores in material well-being (20th) and quality of life (15th) offset by better results in finances (8th) and health (9th).

Proper financial planning can play an important role in improving all four areas. As the authors of the study noted: “Debates about the viability of entitlement programs and the prioritization of short-term goals for lower taxes

While far from the worst country for retirement security, Canada lags behind the likes of Norway, Switzerland, Iceland, Sweden and New Zealand and deficit reductions over ensuring long-term sustainability of retirement benefits make the politics of retirement contentious.”

That comment concerns global retirement in general, but it is particularly relevant for Canada, where the benefits of entitlement programs versus the burden of taxes is a subject of constant debate. Life expectancy in this country continues to trend upward, and as it does, the percentage of working Canadians over the age of 55 will, too. According to Statistics Canada, in 2016, the 55-plus demographic accounted for 36% of the working-age population – the highest proportion on record. By 2026, researchers estimate that proportion could reach 40%.

It changes the dynamic for advisors as they serve as counsel for those entering their golden years. With the vast majority of Canada’s wealth concentrated in the hands of baby boomers, the wealth management industry itself will be shaped by retirees over the next two decades.

The team at Wealth Professional Canada

CANADA

wealthprofessional.ca ISSUE 5.07 EDITORIAL

SALES & MARKETING

Editor David Keelaghan

National Accounts Manager Dane Taylor

Writers Libby Macdonald Leo Almazora Joe Rosengarten

Associate Publisher Trevor Biggs

Executive Editor – Special Features Ryan Smith

Project Coordinator Jessica Duce

Copy Editor Clare Alexander

CONTRIBUTORS Ludmil Natchev

ART & PRODUCTION Design Manager Daniel Williams Designers Marla Morelos Randy Pagatpatan Cess Rodriguez Production Manager Alicia Chin Traffic Manager Ella Dayandante

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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

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31/08/2017 9:51:15 AM

UPFRONT

HEAD TO HEAD

Has CRM2 had a major effect on your practice?

The introduction of the CRM2 reporting standard has been a long time coming – but what does it really change?

Rob McClelland

Colin Reid

Tim Butler

President, senior financial advisor The McClelland Financial Group

Portfolio manager Aligned Capital Partners

Consultant Investors Group Financial Services

“Our clients now have a better under­ standing of YTD, one-, three-, five- and 10-year returns since inception, and now somewhat understand the difference between money-weighted and timeweighted returns and start date bias. Our dealer has provided better reporting on year-end client statements and the tools to provide returns for clients.

CRM2 failed to provide a level playing field: Bank advisors and brokers weren’t required to show the fees that clients are really paying. Banks appear to have agreed to only provide one year of returns after a fairly good year. Overall, it was a good move, but more needs to done.”

“When CRM2 was announced, I started the process of moving my clients to a fee-based platform. This has certainly resulted in some changes. I have had to implement a household asset minimum for new clients. There is extra workload for the staff, as they have more trades and follow-up to do, and added frustration from clients due to the higher volume of paperwork associated with the change.

CRM2 has taken time away from the main focus of my business: building longterm relationships and helping people reach their financial goals. I am sure that this was not the intent of the regulators.”

“CRM2 has forced me to change how I contact [clients] and organize client meetings. It has created more of a sense of urgency with passive clients and has helped me structure a more disciplined contact schedule for client updates and annual reviews.

CRM2 has forced advisors to be more proactive in client servicing and ensuring their clients are aware of the value they provide.

In my own practice, I would be lying if I said I had received any negative feedback up to this point about fees being listed on the statements, but I am conscious that questions will arise.”

DEADLINE DAY FOR ADVISOR FEES This summer saw the deadline for financial advisors to fully comply with CRM2. The new reporting standard means advisors must provide investors with full disclosure regarding their fee, in a dollar amount, on statements. The measure aims to bring greater awareness for clients – who, at least anecdotally, don’t appear to realize how much they are paying to use mutual funds – although critics of the regulation point out that asset managers still don’t disclose management fees in a dollar amount. In addition to that exclusion, trading costs and legal administrative fees are also not covered under the new rules.

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31/08/2017 9:51:48 AM

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MACKENZIE MUTUAL FUNDS MACKENZIE ETFs

Morningstar Star Ratings reflect performance of Series F as of June 30, 2017 and are subject to change monthly. The ratings are an objective, quantitative measure of a fund’s historical risk-adjusted performance relative to other funds in its category. Only funds with at least a three-year track record are considered. The overall star rating for a fund is a weighted combination calculated from a fund’s 3, 5, and 10-year returns, as available, measured against the 91-day treasury bill and peer group returns. A fund can only be rated if there are a sufficient number of funds in its peer group to allow comparison for at least three years. If a fund scores in the top 10% of its fund category, it gets 5 stars; if it falls in the next 22.5%, it receives 4 stars; a place in the middle 35% earns a fund 3 stars; those in the next 22.5% receive 2 stars; and the lowest 10% receive 1 star. For more details on the calculation of Morningstar Star Ratings, see www.morningstar.ca. Quartile rankings and peers beaten are calculated by Mackenzie Investments based on the fund series-level data Morningstar provides. The CIFSC categories, Star Ratings, number of funds in each category, and annual compounded performance for the standard periods are: Mackenzie Global Strategic Income Fund Series F, Global Neutral Balanced category: 1 year - n/a stars 10.6%, 3 years - 4 stars (919 funds) 8.5%, 5 years - 5 stars (614 funds) 10.4%, 10 years - 5 stars (177 funds) 6.3%. Mackenzie Income Fund Series F, Canadian Fixed Income Balanced category: 1 year - n/a stars 5.9%, 3 years - 5 stars (423 funds) 5.0%, 5 years - 5 stars (306 funds) 6.4%, 10 years - 4 stars (130 funds) 4.9%. Mackenzie Strategic Income Fund Series F, Canadian Neutral Balanced category: 1 year - n/a stars 12.6%, 3 years - 4 stars (474 funds) 5.4%, 5 years - 4 stars (350 funds) 7.8%, 10 years - 5 stars (140 funds) 6.6%. Commissions, trailing commissions, management fees, and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. The indicated rates of return are the historical annual compounded total returns as of June 30, 2017 including changes in unit value and reinvestment of all distributions and does not take into account sales, redemption, distribution, or optional charges or income taxes payable by any security holder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.

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2017-08-09 9:45 AM 31/08/2017 9:51:48 AM

UPFRONT

STATISTICS

Hedge fund turnaround

BEATING THE INDEX

After five quarters of net outflows, the global hedge fund industry bounced back in the first quarter of 2017 NOW THAT alternative products are becoming more accessible to investors of all stripes, advisors in Canada are turning to hedge funds to increase diversification for clients. Hedge funds across the globe had a tough year in 2016 as investors decided to put their money into other asset classes. But that tide has turned by Q1 2017 – the hedge fund industry welcomed growth of 3.2%, bringing total assets under management worldwide to US$3.35 trillion.

This represents a new record high for the industry and is evidence that investors’ faith in equity markets may be wavering as they seek greater downside protection through hedge funds. And as hedge fund inflows have increased worldwide, so have returns for investors in the asset class in 2017. This was mirrored in Canada, although the second quarter of the year has seen a bit of a slowdown, according to the Scotiabank Canadian Hedge Fund Index.

Hedge funds worldwide experienced a notable dip in inflows over the course of 2016, but returns from the asset class continue to climb. The funds included in the Scotiabank Canadian Asset Weighted Hedge Fund Index continued to exceed comparable indices such as the S&P TSX.

HEDGE FUNDS SCHFI Asset Weighted SCHFI Equal Weighted EQUITIES S&P 500 S&P TSX BONDS DEX 91-day Treasury Bill Index

$19.9 billion -$8.5 billion Net inflows for hedge funds in North America during Q1 2017

Net outflows for hedge funds in Europe during Q1 2017

4.37%

Year-to-date performance of the Preqin All-Strategies Hedge Fund global benchmark in 2017

DEX Universe Bond Index

0.26%

The Preqin benchmark return in May, the lowest monthly return so far in 2017 Sources: Preqin Hedge Fund Online; all figures in US$

WHERE’S THE MONEY GOING?

CANADA’S BEST-PERFORMING HEDGE FUNDS

Not surprisingly, the hedge funds that saw the highest inflows in the first quarter where those that had a return of more than 5% in 2016.

Despite the challenges of attracting inflows, Canadian hedge funds returned impressive results in 2016. Leading the pack was Phillips, Hager & North Investment Funds, which maintained its ability to generate top-ranking returns for investors across Canada.

Outflows

100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0%

58% 19% 23% Less than -5.00%

No change

48% 17% 35%

Inflows

34%

32%

PH&N Absolute Return Fund Return*: 15.45%

16%

15%

BEST EQUITY-FOCUSED FUNDS

49%

53%

Less than Between -4.99% and 0.00% and -0.01% 4.99% RETURN

ROMC Fund Return**: 17.18%

King & Victoria Fund Return: 15.28%

Venator Founders Fund Return: 13.61%

DKAM Capital Ideas Fund Return: 14.33%

Fiera Long Short Equity Fund Return: 14.18%

BEST GLOBAL MACRO/MANAGED FUTURES/MULTI-STRATEGY FUNDS JM Catalyst Fund Return**: 11.61% 5.00% or greater *10-year annualized return Source: Preqin Hedge Fund Online

6

BEST HEDGE FUNDS OVERALL

PH&N Absolute Return Fund Return: 10.32%

J. Zechner Associates Global Hedged Growth Fund Return: 8.32%

**5-year annualized return Source: Alternative IQ Canadian Hedge Fund Awards 2016

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HEDGE FUNDS HAVE PERFORMED STRONGLY OVER THE LAST 12 YEARS 140% 120% 100% 80% 60%

GROWTH

40% 20% 0% -20% -40% -60% Dec. June Dec. June Dec. June Dec. June Dec. June Dec. June Dec. June Dec. June Dec. June Dec. June Dec. June Dec. June Dec. 2004 2005 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013 2014 2014 2015 2015 2016 2016 Source: The Scotiabank Canadian Asset Weighted Hedge Fund Index

THE LONG-TERM VIEW

THE TOP STRATEGIES

In Canada, hedge fund performance has been on relatively solid footing since a major dip in 2010 and 2011.

However, so far in 2017, Canadian hedge funds have fallen short of the average 4.37% YTD return worldwide.

The best-performing hedge fund strategies so far in 2017 are in fixed income; commodities have posted the worst returns.

YTD return

30%

10% 8% 6% 4% 2% 0% -2% -4% -6% -8%

25% 20% 15% 10% 5% 0% -5% -10% -15% -20%

-10%

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 Source: The Scotiabank Canadian Asset Weighted Hedge Fund Index

CTA Equity Equity Fixed- Global Multiindex hedge market- income macro strategy index neutral index index index index Source: The Scotiabank Canadian Asset Weighted Hedge Fund Index

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31/08/2017 9:52:17 AM

UPFRONT

NEWS ANALYSIS

The Buffett effect After a bailout by the Oracle of Omaha brought Home Capital back from the precipice, the mortgage lender’s shareholders must now decide on a second tranche of investment

THE INVESTMENT story of the summer has undoubtedly been Berkshire Hathaway’s bailout of Toronto-based alternative lender Home Capital Group. When Warren Buffett came to the rescue in June, it took many people by surprise, including the lender’s shareholders, who will soon decide what Berkshire’s total stake in the company will ultimately be. The Home Capital board is seeking approval of Berkshire’s offer to invest $246 million (at $10.30 per share) for an additional 18% stake. This comes on the heels of the original deal of a 19.9% stake at $9.55 a share for $153 million, as well as a $2 billion line of credit.

That loan stabilized what looked to be a sinking ship, and Home Capital stocks bounced back after a precipitous drop in May. Regardless, opinion is divided on whether a further dilution is really what is best for the

investor got involved, but Taylor believed the company’s fundamentals meant there was intrinsic value there.

“If you have a stock with a book value of $24 trading at 20 cents on the dollar, and the mortgages themselves have a loan-tovalue of 75% to 80%, it really gives you a big cushion,” Taylor says.

As a Home Capital shareholder, Taylor will have an opportunity to vote on Berkshire’s overall involvement this month. The firm and its famous founder aren’t known for taking big risks, so clearly they believe Home Capital is an investment with significant growth potential.

“There really are very few companies in the world with the credibility to stem that tide of GIC redemptions,” Taylor says. “Basically you had Buffett buying 16 million shares, and you had his $2 billion line of credit. I’m

“If the housing market rolls over, then maybe it helps to have Buffett at 40% rather than 20%” David Taylor, Taylor Asset Management company, even if it is Warren Buffett doing the buying.

David Taylor of Taylor Wealth Management bought into Home Capital when the share price collapsed earlier this year.

That was before the world’s most esteemed

8

not sure I would want the same deal with anyone else except for Berkshire Hathaway.”

Another Home Capital shareholder who elected to buy in when the lender was engulfed in its liquidity crisis is Jason Nakhoul of Manulife Securities. As a finan-

cial advisor, he’s no stranger to the sentiment that brought about the rush of deposit withdrawals that threatened the lender’s future.

“The whole panic started around a few bad applications, and then the sell-off was really about the fear Canadians have about the real estate market collapsing,” he says.

“The issue became about reputation and brand name, which was magnified by news reports, but at the end of the day, it is a book of mortgages that someone else can buy.”

Opponents of Buffett acquiring close to 40% of the company point to the fact that the lender is no longer in crisis mode and therefore shouldn’t offer shares at such a discounted rate. Both Taylor and Nakhoul see the logic in this argument, but they believe the ongoing volatility in Canada’s real estate market means the Berkshire deal will

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HOME CAPITAL’S CRISIS: A TIMELINE

August 2014: Home Capital launches internal investigation into irregularities on mortgage applications

July 2015: Home Capital reveals it has dismissed 45 brokers for falsifying income on applications

March 2017: OSC serves disclosure enforcement notices to senior executives; CEO Martin Reid is fired

April 2017: OSC releases statement that Home Capital had made “materially misleading statements” to investors

May 2017: Share price sinks to $5.85, having peaked at $55.24 in August 2014 ultimately pass.

“If deposits come roaring back, and if they start to lower GIC rates, and if the stock is still hovering around $18, then I’m not sure we need Buffett to buy the remaining tranche,”

Capital wants to get out of the spotlight and refocus on their business. They had and still have a good business. They have a problem with brand name and reputation, so they are paying a premium to have an investor like

“I don’t think the shareholders will have much of a choice. Home Capital wants to get out of the spotlight ...”

Jason Nakhoul, Manulife Securities Taylor says. “But if the housing market rolls over, then maybe it helps to have Buffett at 40% rather than 20%.”

“I don’t think the shareholders will have much of a choice,” Nakhoul says. “Home

Warren Buffett backing them.”

Canada’s housing market and the prospect of a correction sparking a recession throughout the wider economy is a major concern for policymakers. It’s why the Ontario

government introduced its Fair Housing Plan earlier this year in an attempt to cool the scorching-hot Toronto market. As an investor who had great success buying resource stocks in 2015, Taylor keeps a close eye on market trends in search of undervalued companies.

Most recently that strategy brought him to Home Capital, and although he believes a market downturn is inevitable, he also thinks the lender’s business model remains solid.

“The mistake that a lot of people make is they assume when house prices fall, people will default on their mortgages,” he says. “If your house price falls 20%, that is not what drives defaults – employment is. In most provinces, you can’t just walk away from a mortgage. It’s not like the US where you can send the keys back to the bank.”

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31/08/2017 9:53:05 AM

UPFRONT

INTELLIGENCE CORPORATE ACQUIRER

TARGET

PRODUCTS COMMENTS

Canaccord Genuity Group

Hargreave Hale

Hargreave Hale, a UK-based investment and wealth management business, was acquired through Canaccord’s UK-based business

CIBC

Geneva Advisors

CIBC hopes the acquisition will built on its client relationship capabilities following its PrivateBancorp purchase

PARTNER ONE

PARTNER TWO

COMMENTS

Canada Pension Plan Investment Board

Encino Energy

The partnership, Encino Acquisition Partners, will target non-core energy assets in basins already producing oil & gas

Sprott

CannaRoyalty

The two firms have formed a joint venture to invest in the cannabis industry

WealthBar

PPI

A new platform will let PPI advisors offer competitively priced, diversified portfolios this fall

Bridgehouse launches managed investments program

Bridgehouse Asset Managers has launched the Morningstar Managed Investments Program [MMIP], a collaboration with Morningstar that features five risk-targeted portfolios that select from third-party managers of mutual funds, pooled funds and ETFs. MMIP also features numerous investor experience tools, including an investor profile questionnaire and an investment policy statement to assess investors’ risk tolerance and determine product suitability.

MMIP and the portfolios are offered exclusively on the Bridgehouse Independent Platform, which caters to financial advisors and their clients.

Canaccord snaps up UK wealth manager

Canaccord Genuity Group, through its UK- and Europe-based wealth management business, has agreed to acquire UK-based Hargreave Hale. The transaction expands Canaccord Genuity’s UK wealth management footprint to more than $30.4 billion in private client assets and more than $7.9 billion in fund management assets.

With $13.5 billion in assets under administration, management and management contract, Hargreave Hale is among the UK’s leading indepen­ dent investment and wealth management businesses. It has also established a top-quartile track record among small- and mid-cap fund managers in the UK, serving more than 14,000 private clients, intermediaries, corporations and charities.

“The acquisition of Hargreave Hale is an important step in our strategy of building a leading independent global wealth management business,” said Dan Daviau, president and CEO of Canaccord Genuity Group.

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SaskWorks Venture Fund eliminates deferred sales charge

The SaskWorks Venture Fund, a Saskatchewanbased retail mutual fund that invests in small- and medium-sized private businesses, has eliminated the early redemption fee for Class A – Series A and Class R – Series A shares. As a result of a special meeting held in May, holders of all share classes of the fund will no longer have to pay an early redemption fee of up to 8% if they redeem their shares before the end of the eight-year minimum holding period. The sales commissions and trailer fees that are paid to dealers, however, remain unchanged.

www.wealthprofessional.ca

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31/08/2017 9:53:50 AM

PEOPLE Invesco opens alternative pool to individual investors

To help protect individual investors against unpredictable economic shifts, Invesco has opened Series F of its Invesco Balanced-Risk Allocation Pool to accredited investors. The pool is an actively managed, multi-asset portfolio that aims for positive total return in recessionary, non-inflationary growth and inflationary growth environments.

Led by chief investment officer Scott Wolle, the pool’s portfolio managers use a risk-premium-capture strategy that seeks to generate returns by investing in equity, fixed-income and commodity markets using a long-only, risk-balanced investment process.

RBC Global Asset Management rebrands SRI funds

RBC Global Asset Management has merged and renamed the funds within its two socially responsible investing lineups, PH&N Community Values Funds and RBC Jantzi Funds, as RBC Vision Funds. The suite includes the RBC Vision Bond Fund, RBC Vision Balanced Fund, RBC Vision Canadian Equity Fund and the RBC Vision Global Equity Fund. “Over the past decade, a growing number of investors have sought out investment solutions with socially responsible mandates,” said RBC GAM president Doug Coulter.

“We believe that these options will continue to attract the interest of investors and advisors.”

NAME

LEAVING

JOINING

NEW POSITION

Regina Chi

DePrince, Race & Zollo

AGF Investments

Vice-president and lead portfolio manager, emerging markets strategies

Andrew Kitchen

SEI Investments

Russell Investments

Managing director, institutional Canada

Jean-Philippe Lemay

N/A

Fiera Capital

President and chief operating officer, Canadian division

Monique Leroux

Desjardins Group

Fiera Capital

Vice-chairman and strategic advisor

Joe Oliver

Ministry of Finance

Echelon Wealth Partners

Chairman

Michael Stanley

Quadrus Investment Services

Sterling Mutuals

President

Fiera Capital names new chief of Canadian division

Fiera Capital has appointed chief investment officer Jean-Philippe Lemay to succeed Sylvain Roy as the president and COO of the firm’s Canadian division. A graduate of Université Laval and Stanford University, Lemay is also a fellow of the Society of Actuaries and the Canadian Institute of Actuaries and a Chartered Alternative Investment Analyst. He has 14 years of industry experience, seven of which have been spent at Fiera Capital.

“I am pleased to see Jean-Philippe Lemay rise to a new challenge and manage our Canadian division,” said Fiera Capital president, CEO and chairman Jean-Guy Desjardins.

Russell Investments Canada appoints new managing director

Stone Asset Management announces changes to fund objectives

Stone Asset Management has announced changes to the objectives of two of its funds. The company plans to expand the objective of the Stone & Co. Flagship Growth & Income Fund Canada, converting it from a Canadian equity and fixed-income fund into a global balanced fund that aims for capital appreciation and steady income. Meanwhile, the Stone & Co. Flagship Stock Fund Canada’s investment objective will change to expand investors’ exposure to North American equity securities that target long-term capital appreciation.

Russell Investments Canada has announced the appointment of Andrew Kitchen, a 25-year veteran of the investment industry, as the managing director of its Canadian institutional investment division. Kitchen most recently served as SEI Investments’ managing director for institutional investment in Canada. In his new role, he will be responsible for bringing Russell Investments Canada’s multi-asset investment outsourcing solutions, implementation services and strategic advice to the institutional marketplace.

He will also provide the firm’s clients with strategic direction on best practices in governance, implementation and investment options.

“Andrew brings in-depth, client-focused experience to this key position as the global trend toward investment outsourcing takes hold in Canada,” said Russell Investments president and CEO David Steele.

www.wealthprofessional.ca

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UPFRONT

ETF UPDATE

BlackRock Canada strengthens its core Five new ETFs present an attractive alternative to fixed income as monetary policy begins to shift

(XDIV); the iShares Core MSCI US Quality Dividend Index ETF, with either Canadiandollar-hedged (XDUH) or unhedged (XDU) exposures; and the iShares Core MSCI Global Quality Dividend Index ETF, which also has CAD-hedged (XDGH) and unhedged (XDG) alternatives.

According to Chiefalo, core ETFs like these have accounted for the majority of dollar flows in the Canadian ETF space over the past few

“These products could potentially perform better in a rising-rate environment and protect invested capital”

On the heels of interest-rate hikes from the Fed and the Bank of Canada, BlackRock Canada has expanded its line of iShares Core funds with five new quality dividend ETFs, designed to give investors access to dividends across different geographic and currency exposures.

According to Pat Chiefalo, head of product at iShares, the new ETFs offer an income level that’s likely to exceed many fixed-income products today, except those from the high-yield corner of the market. “These are going to be higher than most investment-grade products you’ll find out there,” he says. He did caution,

NEWS BRIEFS

however, that dividend ETFs come with equity market risk, which differs substantially from fixed-income market risk.

The prospect of higher interest rates also makes dividend ETFs attractive in terms of capital protection. “These products could potentially perform better in a rising-rate environment and protect invested capital, as opposed to fixed-income products that may see some increased volatility as we move into a potentially higher interest-rate cycle,” Chiefalo says.

The new suite includes the iShares Core MSCI Canadian Quality Dividend Index ETF

First Asset launches US trend-focused ETF

First Asset Investment Management has launched the First Asset US TrendLeaders Index ETF (SID), designed to replicate the performance of the CIBC TrendLeaders Index. Composed of equity securities issued by US companies, the index ranks securities based on the duration and longevity of certain underlying trend strengths. Aside from meeting a minimum threshold of average daily traded dollar value volume, all equity holdings in the index and ETF are members of the Solactive US Large and Mid Cap Index.

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years, both in equity and fixed income. The growth of BlackRock’s iShares ETF business has mirrored that industry trend. Recent advances in technology, coupled with BlackRock’s global scale, have made it easier for the fund giant to deliver competitively priced dividend funds to Canadian investors.

“By leveraging technology, we’re able to create a system that’s able to screen a broad universe of underlying stocks, look for things specifically like a quality overlay and attractive dividend yield, and assemble an efficient portfolio,” Chiefalo says. “Given our scale, we’re able to offer that product at a competitive rate to investors, and we’re able to pass along our efficiencies to help investors save as they invest for retirement.”

IFIC’s ETF course gets MFDA recognition

The Investment Funds Institute of Canada [IFIC] and the IFSE institute have announced a new ETF course that meets newly released proficiency standards from the MFDA. Orienting advisors on aspects such as the mechanics of ETFs, what types of trades are accepted, and disclosure and record-keeping requirements, the course satisfies requirements for suitability, the ‘know your product’ rule and due diligence.

It has also been approved for 15 continuing education credits for numerous industry organizations, including IIROC and FPSC.

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Q&A

Jeff Weniger Asset allocation strategist WISDOMTREE ASSET MANAGEMENT

Years in the industry 12 Fast fact WisdomTree has a total of eight ETFs that give Canadian investors exposure to broad international equities and fixed income

WisdomTree aims to conquer Canadian fixed income What was behind the decision to launch the WisdomTree Yield Enhanced Canada Aggregate Bond Index ETF (CAGG) and WisdomTree Yield Enhanced Canada Short-Term Aggregate Bond Index ETF (CAGS)?

We’re a top 10 global provider by AUM in ETFs. We don’t want to come in, take a small portion of someone’s portfolio, and argue that the holdings they already have are going to be satisfactory simply to win business. We want to say, “There’s something flawed with what you’re doing right now.” It could be holding expensive actively managed funds, just being in a mutual fund structure in general or holding cap-weighted passive ETFs for the low fees – all scenarios we can compete tremendously on. We’re here to manage the entire bucket, if you will, of somebody’s Canadian fixed income.

How do you think these funds differ from other comparable funds?

Around 613 mutual funds in Canada are focused on Canadian fixed income; for ETFs, there’s just 29. If you multiply the number of ETFs around seventeenfold so there’s the same number of ETFs as there are mutual funds, you’ll see tens of billions of dollars just aching to come over to the ETF side. We’re there with our management fee at 18 basis points; mutual funds’ fees are well into three digits. With aggregate bond yields somewhere around 1.9%, it’ll be very difficult for someone who’s in mutual funds to generate alpha that can overcome that fee disparity.

ETF inflows on pace to beat last year’s records

According to ETFGI, global investor inflows into ETFs reached about US$335 billion by the middle of 2017, just US$55 billion away from 2016’s whole-year record for inflows. BlackRock’s ETF business had attracted US$140 billion in investments globally as of June, slightly ahead of its 2016 showing of $US138 billion. Its closest rival, Vanguard, had recorded US$82 billion in inflows, putting it on course to beat its 2016 record of US$97 billion. State Street Global Advisors and Charles Schwab have also experienced significant accelerations.

Our competitors in cap-weighted ETFs can argue that their fees are bargain-basement. But even though our fee is higher by a few basis points compared to some large Canadian fixed-income ETFs, we’re easily exceeding that differential on the yield side. The yield on CAGG was at 2.37% as of June 30 – better by almost 0.5% than a similar product from a major competitor. When all’s said and done, they’re using cap-weighted indexing, whereas we’re asking ourselves, “How can we provide incremental income within passive funds in an environment that’s starved for yield?”

What role do you think these smart-beta fixedincome ETFs should play in investors’ portfolios?

The cool thing about CAGG and CAGS is that since they’re both playing within aggregate bonds, you can buy one, buy the other or pair them up to create your own sliding duration scale. Aggregate bonds in Canada have a duration of 7.9 years. If you own CAGG by itself, that’s 8.9, but maybe you want it to be 6 or something lower.

CAGS, by nature of being shorter, has a 3.2-year duration.

So you can slide your yield duration between 3.2 and 8.9 years. And then you get the yield plus, which we think is going to shake our competitors.

Sometimes portfolios are more complicated than they need to be. You see some people holding a large slug of 10 or 20 individually listed bonds, sometimes more.

Maybe they like to see that and feel like their money manager did something for them, but when you hold aggregate bonds, you can be diversified with hundreds of bonds with just one or two ETFs.

Canadian ETF market hits new milestone

Canadian ETFs broke a new record at the end of June, notching a total of $130.9 billion in assets. BlackRock Canada led the pack with $56.5 billion invested in 117 ETFs. BMO Asset Management placed second with roughly $40.9 billion over 76 ETFs, followed by Vanguard Canada with around $12 billion across 33 ETFs. In terms of asset class, equity ETFs accounted for the greatest market share, cornering 67.2% of the market. Fixed-income ETFs had 30.3%, and the rest was divided among commodity, multi-asset-class and currency ETFs.

Evolve Funds to launch innovative new funds

Evolve Funds Group has filed a preliminary prospectus to launch five ETFs focused on emerging trends and industries. The Evolve North American Gender Diversity Index ETF (HERS), Evolve Cyber Security Index ETF (CYBR) and the Evolve Automobile Innovation Index ETF (CARS) would be the first Canadian ETFs to focus on gender diversity, cyber protection and automobile innovation. Evolve is also looking to launch the Evolve US Banks Enhanced Yield ETF (CALL) and the Evolve Global Healthcare Enhanced Yield ETF (LIFE).

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UPFRONT

ALTERNATIVE INVESTMENT UPDATE NEWS BRIEFS Fineqia subsidiary launches beta platform Fineqia International, through its UK subsidiary Fineqia Limited, has launched a beta version of its new debt and equity platform. Delivered in partnership with JOI Media, the platform aims to bring crowd investors an information advantage, as well as exposure to carefully selected opportunities that the firm says offer a good balance of quality and low risk. Many of the deals on the platform were previously only accessible to institutional investors. Opportunities will be made available once the platform goes from beta to officially open.

Raintree Capital expands into portfolio management Raintree Capital has launched Raintree Wealth Management [RWM], a new end-to-end service to help clients with disciplined, long-term investments.

According to RWM CEO Peter Kinkaide, the firm uses a valuation framework to objectively assess current markets based on reasonable long-run expectations.

Offering access to publicly traded and liquid securities, the firm positions client portfolios based on income, growth and valuation assessments of markets. RWM has partnered with investment managers ETF Capital Management; Polar Asset Management Partners; Leon Frazer & Associates; and Foyston, Gordon & Payne.

Rising rates are making Canadian REITs a risky bet Real estate investment trusts generally do well in an increasing interest-rate environment because they benefit from strengthening economic factors. However, TimberCreek Asset Management’s

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Corrado Russo recently told Bloomberg that this is less true in Canada. Because of longer-term leases and relatively low tenant turnover, landlords in Canada have fewer opportunities to raise rents.

This leads to steady cash flow and higher leverage, making Canadian REITs more bond-like and sensitive to interest rates compared to their global counterparts.

Investor advocates sound alarm on hedgefund push Following a push from fund managers and investment advisors, Canadian regulators are proposing to let retail investors participate in hedge funds.

Under the new system, investors would be able to access hedge funds that comply with standards such as offering daily liquidity, filing a prospectus, and releasing interim and annual results.

But investor protection groups assert that managers are just interested in collecting more fees; according to Marian Passmore, director of policy at the Foundation for Advancement of Investor Rights, most investors will not understand the funds’ different characteristics and risks.

Deloitte forecasts near-term flatness for oil industry A recent report from Deloitte notes that higher production from US and Canadian rigs has undermined OPEC’s oil-cut strategy, thus preventing significant price increases over the next few years.

Deloitte partner Andrew Botterill has predicted that WTI prices will hover between $45 and $60 for the next three years, as producers are drilling new wells effectively and will probably be efficient with capital spending. Natural gas prices are also expected to stay unchanged as North American supply, demand and storage levels remain stable.

Twenty years of solid returns Trez Capital continues to find opportunities in alternative mortgage lending Currently celebrating its 20th anniversary, Trez Capital provides alternative mortgage financing for qualified North American property owners, investors and developers operating in Canada and the US. Currently, it sees promise in the residential development and construction financing marketplace, particularly in Toronto and Vancouver.

“We have originators in Vancouver covering the Western provinces and in Toronto covering the Eastern provinces,” says Trez Capital president Greg Vorwaller. “Our area of focus is short-term, secured bridge lending. We’re placing commercial mortgages on assets that are otherwise in transition with the view that the term of our financing is anywhere from six to 36 months.”

In the large, fragmented market of the US, Trez is focused on growth regions in the Southeast, the Southwest (anchored by Texas) and the West Coast. There, the firm is finding gems in financing single-family home lot developments and construction of for-sale and for-rent multi-family housing, as well as industrial, retail and office properties.

“There’s opportunity because regulatory pressure on US banks is limiting their ability to provide financing solutions, even for very well conceived and sponsored projects,” Vorwaller says.

Vorwaller is forecasting around $1.5 billion in new loan originations this year – good news for

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Q&A

investors who have provided the firm with robust net inflows of capital. “Traditional fixed income certainly has a place in an investor’s portfolio, but alternative fixedincome products can greatly enhance returns

“We’re quite proud of the returns we’ve been able to generate, given our primary objective of principal protection” while actually decreasing the amount of risk,” he says. “While traditional fixed income is generally quite sensitive to interest-rate risk, our pools are built on mortgages that are typically floating, with a floor.”

Trez differentiates itself from competitors by offering different solutions to individual high-net-worth investors. Trez Capital Prime Trust, the most conservative mortgage pool, has generated average annualized returns of 7.3% since its inception in 2006. The flagship Trez Capital Yield Trust, focused on commercial mortgage lending in Canada and the US, has achieved annualized returns of 8.1% since its inception in 2009. And for Trez Capital Yield Trust US, which is focused solely on the US, returns have averaged 10.1% annually since its inception in 2013.

The firm also sponsors closed-end funds for Canadian institutional investors, which include three of Canada’s largest pension funds. The closed-end funds have seen annualized returns of anywhere between 7% to more than 9%.

“We’re quite proud of the returns we’ve been able to generate, given our primary objective of principal protection,” Vorwaller says. “That really rests with our commitment to provide investors with attractive and consistent riskadjusted returns.”

Georgina Blanas

Canada’s hidden gem

Executive director PRIVATE CAPITAL MARKETS ASSOCIATION

Years in the industry 20+ Fast fact The Private Capital Markets Association represents issuers, dealing representatives and other professionals involved in private capital formation

As the Private Capital Markets Association’s first female executive director, how do you hope to impact the industry?

At the PCMA, we focus on impacting the industry by promoting awareness and education about the private capital markets, as it is one of the largest areas for economic growth and capital growth in Canada. For many businesses, everything from inception to growth is made possible through private capital. According to recent data from regulators, the number of dollars raised through the private capital markets is twice the amount from public markets.

This is a critical area of investment that people need to learn about; it’s where innovative businesses like Shopify and GoldMoney come from. It’s an area that we obviously can look to grow and continue to concentrate our efforts on, and already we’ve been working on that.

Can you discuss the PCMA’s role in advocating for its members and representing the interests of stakeholders?

We start with a grassroots approach. By listening to our members, we understand and know what’s important to exempt-market dealing representatives, issuers and other professionals. Based on forums, committees and networks we have at the PCMA, we’re concerned about the amount of red tape in Canada. Obviously, we want to protect the investors and make sure products in the markets are innovative and of high quality, but we also have to make sure our economy flows and allows for capital to be raised efficiently.

Sometimes, policies and execution don’t come together. We aim to remedy that by reaching out to and having discussions with officials, submitting comment letters, participating in various committees, and taking part in stakeholder meetings, to name a few. That extensive input is where we really raise the bar in our advocacy. As changes that will affect the markets approach, we’re working to be even more proactive at the request of our membership.

How significant of a role do the private markets play in fuelling Canada’s economic growth?

I think the seed of most companies in the country has been their success in the private markets. We don’t often talk about Canada’s ability to find financing for small, medium and large enterprises. In 2016, 5,357 exempt-market distributions were completed, raising over $78 billion by issuers from Ontario investors. Non-financial issuers, meanwhile, raised more than $14 billion spread over more than 2,322 exempt-market distributions last year. Through a new partnership, the PCMA will soon be able to release more of these kinds of figures for the first time in Canada.

Of course, we have to look at how things like the NAFTA agreement and the recent quarter-point hike from the Bank of Canada will affect us. But even with those factors, the need to fund innovation, and the need for innovative ideas and products, will continue to grow, and we continue to see the private capital markets playing a crucial part.

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UPFRONT

LIFE INSURANCE UPDATE

Retirees group calls for pension protection CARP highlights the need for a federal backstop for companies that can’t pay retirement benefits

for the pensioners who were in court.”

While Sears’ future very much hangs in the balance, the reality for its retirees is that the company’s pension fund has a deficit of $267 million. Should the company declare bankruptcy, the likelihood the retirees will receive their benefits or pension looks slim.

When it comes to the company’s debts, former workers will not be at the front of the queue,

“We want the legislators to require all provinces to have a mandatory pension-funded insurance plan”

The national advocacy group for retirees has called for new legislation to protect workers’ pensions. CARP (previously the Canadian Association of Retired Persons) issued a statement in mid-July in response to a settlement between Sears Canada and its employees regarding retirement benefits.

In June, the beleaguered retailer asked permission from the Ontario Superior Court to cease payments for health and dental benefits, life insurance and pensions for former employees, retirees and surviving spouses.

This was vehemently opposed by those

NEWS BRIEFS

affected; the court ordered the company to continue paying benefits and pension payments up to the end of September.

According to CARP spokesperson Anthony Quinn, regardless of what happens with Sears’ restructuring efforts, its past and present employees should be protected.

“I think everyone hopes Sears will take this opportunity to find a plan to save as many jobs as they can and continue to pay the benefits they owe to pensioners,” he said. “If this is just a period of grace until they shutter the doors or file for bankruptcy, that’s not much of a win

Canadian seniors deserve to sell their life insurance

One advocate says Canadian seniors are being prevented from adopting a practice that could unlock “billions of dollars” from their life insurance policies.

Leonard Goodman of the Life Insurance Settlement Association of Canada says regulations in six provinces prevent policies from being sold through the process of life settlement. Goodman said more than 80% of life insurance policies are either cancelled or expire without a claim ever being made, adding that life settlements can provide a much-needed source of retirement funding.

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Quinn admitted, but he added that this needs to be rectified by policymakers.

For former Sears workers in Ontario, there is respite in the form of the Ontario Pension Benefits Guarantee Fund, which guarantees private-sector pensions up to $1,000 per month. However, Quinn believes this safety net needs to be rolled out across Canada as concerns about adequate pension provisions mount across the country.

“In Ontario, there is a mandatory contribution paid by defined-benefit plans into a fund if a company cannot meet its commitments,” he said. “It is maxed out at $1,000 a month, so it’s not the full pension, but it is a lot more than other provinces get. We at CARP want the legislators to require all provinces to have a mandatory pension-funded insurance plan.”

Toronto Raptors and Sun Life team up to fight diabetes

The NBA is introducing jersey sponsorships for next season, and Sun Life Assurance will be the first company to adorn the jersey of the Toronto Raptors, furthering a long-standing partnership with the franchise. Central to the relationship is the fight against diabetes, a cause the organizations have collaborated on for more than four years. “We see the devastating impact that diabetes has on the well-being of Canadians on a daily basis,” said Sun Life’s Paul Joliat. “Our goal is to help individuals lead healthier, active lifestyles.”

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Q&A

Kim Oliphant

Predictive analytics: the new face of underwriting

Vice-president, sales and marketing HUMANIA

Years in the industry 24 Fast fact Humania Assurance was honoured with a Digital Transformation Award for its HuGO platform at the Digital Transformation Conference and Awards

Humania recently won an award for its HuGO platform. How long did the platform take to develop?

It’s a project that took us about two years. It’s our third platform, so we were able to learn from what we had with our first two platforms. The intent is to offer the Canadian marketplace term life insurance at a competitive price in 15 to 45 minutes. That’s the innovation in the platform and the objective we set out to reach. Six months after the launch, we are hitting those targets.

Are there particular products that the HuGO platform is made for, or is it Humania’s full suite?

We built a term life insurance suite – specific products built for that platform. We have an objective to transfer all our products to this platform. We will be fully digital in terms of product offerings by the end of 2018.

The turnaround time of 15 to 45 minutes is very fast. How is that achieved?

A reinsurer study showed us that the average was 30 business days. Our products are sold exclusively through an advisor, not directly to clients. The HuGO platform has a tailored questionnaire based on the clients’ answers. The advisor can have 10 different clients, and it will be 10 different questionnaires because each question will be driven based on the previous answers. It is tailored specifically, and the objective

CLHIA CEO seeks to balance privacy and information access

New CLHIA head Stephen Frank has put overturning controversial Bill S-201, which prohibits employers and insurers from asking for genetic testing, at the top of his priority list. “We will be supporting the Quebec government’s current appeal on the grounds that it is not constitutional,” Frank said. “We hope that we can get relief on that through the courts, then we can move forward with a more thoughtful balanced approach on the need for privacy, but also where insurers can have access to full information when we are underwriting.”

is to ask as few questions as possible, but still be comfortable with the risk and issue the policy as quickly as possible. It is very innovative in the market.

Is this achieved using predictive analytics?

Behind HuGO we have 3,000 questions and a rule book, which we built using predictive analytics. We also have eliminated the automatic requirements for $1 million or less. If the client is applying for less than $1 million, you will only be asked for tests that are necessary. That’s instead of having automatic testing on everybody who is a certain age.

For complex cases where the clients have more moderate risk and certain health conditions, they will be referred to an underwriting team. Then it’s more of a traditional underwriting process, and if they feel a test will be helpful to render a decision, then we will do it.

Life insurance purchase rates have been falling for some time now, especially with younger people. Do you think products like these are the answer to reversing that trend?

Absolutely. Younger people don’t expect applications to take a month and require a battery of tests. We are about 50% over our sales targets we had when we launched, so we are very excited. From a consumer standpoint, it is a win, and from an advisor standpoint, they are a lot more productive. You can adapt to your clients – you can meet face-to-face, or if they want to just meet over Skype, then that’s fine, too.

Freedom 55 commits to advice channel with new centre

Freedom 55 Financial says its new financial centre in Markham is testament to its belief in the advisory business. The London Life subsidiary unveiled its “office of the future” in July, the first stage of a company-wide overhaul of its financial centres. Key to the success of the updated centres will be increased technical capa­bilities. “We are absolutely committed to the advice channel,” said Freedom 55 VP Abbie McMillan. “What we are trying to do is use technology to enable advisors to be more efficient and effective for their clients.”

Life insurance not a priority for most millennials

A new study by TD Insurance on millennials’ financial well-being confirms that life insurance remains a tough sell for younger Canadians. In fact, Gen Y ranked life insurance at the bottom of its list of financial priorities. More than half (55%) of respondents said they don’t have any life insurance, citing cost (55%) and not having dependents (37%) as the main reasons for forgoing coverage. Among those surveyed, 25% said paying down debt was their top financial priority, while 21% said they were focused on saving for a house.

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UPFRONT

HEALTH INSURANCE UPDATE NEWS BRIEFS TTC employees charged in benefits fraud probe

The Toronto Transit Commission [TTC] and police authorities have filed charges against 10 current and former TTC employees in relation to an alleged multi-million-dollar benefits scam. The charges were the first filed as a result of a years-long probe, which the TTC said has already resulted in 150 employees being fired, retired or leaving the agency, according to the Toronto Star. Each of the suspects faces one count of fraud amounting to more than $5,000. “This is public money, and people will be held to account,” TTC spokesperson Brad Ross said. “We want to bring an end to this.”

Quebec strikes deal with generic drug association

The Quebec government and the Canadian Generic Pharmaceutical Association have signed a five-year agreement that the province estimates will provide $1.5 billion in savings.

Central to the deal is a clause that precludes the government from putting out tenders for generic drugs. Quebec currently spends about $800 million per year on generic drugs; health minister Gaetan Barrette said the new deal will reduce that figure by about $300 million annually. “Quebecers will see ... [that] the price of generic drugs will go down as of this fall,” Barrette said.

Canadian patients head south to avoid long waits

While Canada’s healthcare system provides coverage for medically necessary treatment, many procedures entail long wait times, which is pushing thousands of Canadians to seek care on their own. “In 2014, more than 50,000 Canadians left the country for medical

treatment, a 25% increase from the previous year,” said a recent report on Huffington Post Canada. “A similar number left the country for treatment in 2015.” Citing a Fraser Institute study, the publication said wait times in Canada had hit a 20-year record high, which experts attributed to numerous factors, including miscommunications between different parts of government, a dearth of doctors and an aging population.

Low marks for Canada’s health system

Health benefits provider eyeing expansion to the US

A recent global survey of 11 healthcare systems ranked Canada third to last

Kingston woman leads campaign for universal pharmacare

The Commonwealth Fund, a New Yorkbased research foundation, has ranked Canada’s healthcare system third to last in a study comparing 11 developed countries; only France and the US ranked lower. UK, Australia and the Netherlands led the pack as the top-ranked countries. While the study was mainly focused on the poor state of healthcare in the US, it also touched on weaknesses in Canada’s system.

The study drew data from various sources, including the Commonwealth Fund’s own international surveys of patients and doctors, the World Health Organization, and the Organization for Economic Co-operation and Development. Based on an analysis of 72 metrics grouped into five categories (care process, access, administrative efficiency, equity and healthcare outcomes), the authors found that Canada has a comparatively high infant mortality rate, wide prevalence of chronic conditions, long wait times to go into emergency and to see specialists, limited availability of after-hours care, and a lack of reliable coverage for dental work, prescription drugs, and other treatments.

The study further determined that 10% of Canada’s GDP went to healthcare in 2014, although many other countries managed to do better overall while spending less.

Three-year-old Toronto-based firm League is in the process of expanding its digital health benefits platform across the US. The provider first dipped its toe into US waters last October in the tech hub of Seattle, and success there has facilitated a national rollout over the next year. “The top 10 markets – cities and metro areas – are worth more than 80% of the business, so we are focused on those top 10 markets and getting there by next summer,” said League founder and CEO Michael Serbinis. “Boston, Massachusetts; San Francisco and LA in California; and Dallas and Houston in Texas are next on the hit list.”

A woman from Kingston, Ontario, has started a national grassroots push for the federal government to implement universal pharmacare before the 2019 election, launching an electronic petition on the Government of Canada website. “It’s all a matter of sensitivity, compassion and an understanding of what’s going on with your neighbours, the people in your community and the street,” said Catherine Bell-Sood.

Currently, the Canadian public healthcare system is the only one in the world that covers prescriptions solely for inpatients.

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“That Canada has the worst access in the developed world will surprise no one,” André Picard wrote in an analysis of the report for the Globe and Mail. “Waiting is a hallmark of our health system, from primary care through to admission to long-term care. That so many

While the Canadian healthcare system was ranked poorly overall, it scored well on many metrics. The mortality rate for heart-attack patients who are hospitalized was among the lowest noted in the study; there were also relatively high survival rates

“That so many other countries can provide timely care at lesser cost should underscore that there is no excuse for our dismal performance” other countries can provide timely care at lesser cost should underscore that there is no excuse for our dismal performance.”

The study also pointed to greater disparities in healthcare between lower- and higherincome Canadians. Adults in Canada were more likely than those in other countries to skip necessary doctor or dentist visits, forgo treatments, or not fill prescriptions due to cost.

observed for certain types of cancer. And compared to their counterparts in other countries, Canadian doctors were not likely to say they spent too much time doing administrative work.

Canada’s current showing is actually better than in the previous Commonwealth survey in 2014, where it ranked second to last. The authors noted that because results are gener-

ally separated by just a few percentage points, even small differences in scores can change a country’s ranking.

The authors also acknowledged other limitations, such as the variable availability of health performance data across nations and the lack of direct information from medical records and administrative data. Since the report relies heavily on patient experience measures, it’s also possible that assessments by respondents from different countries were coloured by cultural expectations.

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UPFRONT

OPINION

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

The case for better education Regulators aiming to clean up the industry should cast an eye on the dearth of qualifications required for advisors, writes Ludmil Natchev IT SEEMS to me that the big narrative in the investment industry nowadays is that change is everywhere, and that it is relentless, imminent and happening at a faster pace than ever before. For some reason, however, I can’t really see it or feel it. It could be that I started in the business at a time when talk about increased regulation was already underway, and I am used it. What is far more likely, though, is that these proposed new rules are euphemistic in nature and do not really affect anyone who is running a half-decent practice.

Now, I don’t mean to disparage the regulators’ efforts to clean up the industry, but I believe they are somewhat missing the point.

While there is considerable and growing regulation regarding the work advisors do and the products they sell, regulation regarding financial advisors themselves is minimal at best and nonexistent at worst.

This is a massive problem, and its symptoms can be seen in the industry’s backlash against the IIROC’s new requirements for the reporting of investment costs and performance, the CSA’s move to consider a ban on embedded commissions, and the possibility of a ‘best interest’ standard. It is mind-boggling that such common-sense initiatives weren’t introduced years ago, and the fact that they are creating so much discussion is problematic in itself.

Just try to imagine another industry

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where you don’t receive a clear bill for services rendered, or where you’re uncertain about just what it is you’re paying for.

Moreover, if such an industry existed for as long as the investment industry has been around, it would be hard to believe that increased disclosure or changes to the ways its operators receive their compensation

and their place in it. In a recent survey conducted by Ipsos on behalf of Lowrates.ca, 57% of Canadians failed a test on basic financial literacy, and the few who passed attained a C or D grade.

Another study – the 2017 Fidelity Retirement Survey Report – focused on how Canadians near and already in retirement are approaching the next stage of their lives, and it indicated that almost seven out of 10 (68%) of respondents do not have a written financial plan. This is particularly troubling in the current environment of disappearing defined benefit pensions and low interest rates – committed professionals would surely double their efforts to inform and educate their clients. Why, then, did these surveys produce such poor results?

I believe the answer to this question lies in the low educational standards for the advisors who are supposed to be educating retail investors in the first place. It is incredible that the minimum academic training for an advisor consists of a couple of self-study courses that require fewer than 250 hours of reading. What is even more astonishing is that one does not need a university degree

“While there is considerable and growing regulation regarding the work advisors do and the products they sell, regulation regarding financial advisors themselves is minimal at best” would result in any material and significant improvement for its consumers. So why would anyone expect that this will be the case for our industry?

According to the most recent Investment Executive Dealers’ and Brokerage Report Cards, the average advisor in Canada is in his mid-fifties with more than 20 years of experience in the business. It’s difficult to imagine that someone with this much experience doing things a certain way would rather adapt to than circumvent the new rules.

And it’s very hard to argue that the investment industry has generally done a great job at informing and educating retail investors about the workings of the financial system

and that the passing grade for these courses is 60%. When I went to McGill a few years ago, such a score would have resulted in a solid C+.

This institutionalization of mediocrity is, in my opinion, far more pernicious than any other issue that has become a part of the public discourse regarding our industry.

The opinions expressed are those of the author and may not necessarily reflect those of Manulife Securities Inc. Manulife Securities Inc. is a member of the Canadian Investor Protection Fund and a member of the Investment Industry Regulatory Organization of Canada.

Ludmil Natchev is an investment advisor with Manulife Securities Inc. in Oakville, Ontario.

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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. Sentry, Sentry Investments, the Sentry Investments logo and Calmly create wealth are trademarks of Sentry Investments Corp.

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2017-08-11 2:45 PM 31/08/2017 9:59:43 AM

PEOPLE

INDUSTRY ICON

A VETERAN PRESENCE David Little of Little Wealth Management Group reflects on how the advisory business has evolved during his three decades in the industry

DAVID LITTLE has seen it all during his 33 years as a financial advisor. In that period, companies have come and gone, markets have soared and crashed, money has been made and lost – but through it all, his investment strategy has remained largely the same.

Like Warren Buffett, Little seeks out businesses with solid fundamentals that he can invest in for the long haul. It’s a strategy that has served him and his clients well, and proved especially lucrative in the aftermath of the first major crash of his career: Black Monday, 1987.

“The ’87 crash I can remember like it was yesterday,” Little says. “I had an older colleague tell me to get on the phone and tell every client I had that they had never seen a better opportunity to buy investments.

That’s exactly what I did.”

Changing times Little, who received the Lifetime Achievement Award at the 2017 Wealth Professional Awards, made his start in the business with North American Life in 1984 before moving on to Chancellor Consultants two years later. It was a very different time

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for advisors – one when the compensation model attracted many to the profession.

“The industry itself is totally different now,” Little says. “Back in the 1980s, we used to get a 9% commission, and everything was done through a large application form. Now I get about 75% of 1%.”

were taking pictures of us on the beach, drinking by the pool, and while we were still down there, the paper had a front page article in the business section: ‘This is how your money is being spent by advisors.’ It didn’t show that we were actually in meetings for eight hours a day.”

“I went fee-based to remove any confusion for a client that anything I did with their portfolio was to generate a commission. I have heard rumours that 60% to 70% of the industry is still transactional. It is just not good for clients” Then came the 1990s, when the mutual fund industry grew exponentially across Canada. It was a boom period for the advisory business, too, but this growth brought increased attention, first from the media and then the government.

“Our annual vacation in 1998 for the top advisors at Fortune Financial was in Hawaii, and the Globe and Mail sent two reporters and a photographer,” Little recalls. “They

The article provoked plenty of reaction, but Little believes one individual in particular was responsible for changing the perception of financial advisors, especially among lawmakers.

“Glorianne Stromberg wrote the most damaging report about how bad this industry was,” he says. “From that point on, there was a severe turn in the eyes of the regulators to improve things for clients.”

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PROFILE Name: David Little Title: Director, senior investment advisor, personal financial planner Company: Little Wealth Management (HollisWealth) Based in: Burlington, Ontario Years in the industry: 33 Fast fact: Having joined Fortune Financial in 1994, Little has seen the firm come under the umbrella of Dundee Wealth and then Scotiabank/ HollisWealth. This year represents another change as iA Financial takes over the company..

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PEOPLE

INDUSTRY ICON

Regulation and compliance would become an even bigger factor for advisors after the financial crisis of 2008, and it has continued in that vein ever since. In Little’s opinion, it’s a major reason why the business struggles with recruitment and why many experienced advisors have decided to make their exit.

“In my opinion, the government has been anti-business and anti-advisor, and that is why the industry has lost so many people,” he says. “I literally know five guys in the last two weeks who have said they’re done and they are leaving. I was recently told the

“One of the problems in the industry is the president’s clubs with all the major firms,” he says. “I have been within the top 25 in terms of revenue generation with my company, but I have never been in a president’s club since I went fee-based.

Companies are still rewarding transactional advisors over fee-based, but I think that’s coming to an end.”

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Like many investors, David Little holds Warren Buffett in high regard. The Oracle of Omaha famously extols the benefits of taking longterm positions and reaping the benefits of compounding interest. Here are some of the holdings of Buffett’s firm, Berkshire Hathaway:

Meeting the legend As a disciple of Warren Buffett, it’s not surprising that Little is a shareholder of Berkshire Hathaway, an arrangement that

“The average holding period for an investment back in the 1980s was something like five years. Now I believe it is less than four months. Money is more migratory today than it has ever been” average age of an advisor in Canada is somewhere between 58 and 60.”

While Little clearly believes the regulators have been too quick to impose certain standards upon financial planners, one area where he sides with them is fees. The fee versus commission debate rages on, but Little is surprised it’s even still an issue.

“I was one of the first guys to go fee-based with Dundee,” he says. “It was 2003, and I did that to remove any confusion for a client that anything I did with their portfolio was to generate a commission. I have heard rumours that 60% to 70% of the industry is still transactional. It is just not good for clients.”

It’s a dilemma that is being facilitated by advisory firms themselves, he says, because advisors who generate higher commissions through sales are often rewarded over those who act in their clients’ best interests.

COMPOUNDING BUSINESS MACHINES

has brought him impressive returns over the years. It has also allowed him travel to Omaha to meet the world’s most revered investor in person at the Berkshire annual shareholders’ meeting, dubbed ‘Woodstock for Capitalists.’

“The main thing I took away from that is when he said a good investor should only be allowed to make 20 decisions in a lifetime on their investments,” Little says. “Once they have used up their 20, they are stuck with them. I think that is so true.”

As a philosophy, it isn’t exactly rocket science, but having the patience to hold an investment through market cycles is something most investors simply can’t manage.

“The average holding period for an investment back in the 1980s was something like five years,” Little says. “Now I believe it is less than four months. Money is more migratory today than it has ever been.”

AMERICAN AIRLINES GROUP In its most recent filing to the US Securities and Exchange Commission, Berkshire revealed it had a 10.34% stake in the airline, with a value of US$2.37 billion

KRAFT HEINZ In 2014, Berkshire partnered with 3G Capital for the US$28 billion takeover of the Pittsburgh-based food products giant. Today the firm has a 26% stake worth more than US$29 billion

COCA-COLA Buffett is a longtime supporter of the classic American brand; Berkshire holds a 9% stake worth US$18 billion

WELLS FARGO Buffett’s largest banking interest is a 9% stake in Wells Fargo, worth US$25 billion

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Invesco is a registered business name of Invesco Canada Ltd. Invesco®, Platform Traded Fund™, PTF™ and all associated trademarks are trademarks of Invesco Holding Company Limited, used under licence. Trimark® and all associated trademarks are trademarks of Invesco Canada Ltd. © Invesco Canada Ltd., 2017

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2017-08-11 3:23 PM 31/08/2017 10:00:16 AM

FEATURES

SPECIAL REPORT

CERTIFICATION

SURVEY 2017 Which designations are most valuable in order to succeed in wealth management in 2017?

Advisors offered their opinions in Wealth Professional Canada’s annual Certification Survey

ABOUT THE SPONSOR The Canadian Securities Institute [CSI] is Canada’s leading provider of financial services training and certification, helping more than 750,000 professionals reach their career goals. CSI has earned its reputation through real-world training courses and assessments, innovative educational offerings, and expertise ranging from securities to mutual funds, from banking and trust to insurance, from portfolio management to financial planning and wealth management.

CSI offers more than 200 courses, including the Canadian Securities Course [CSC®] and 13 specialized certificates and industry-recognized designations, such as the Personal Financial Planner [PFP®], Chartered Investment Manager [CIM®], Certified International Wealth Manager [CIWM] and the Fellow of CSI [FCSI®].

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THE THIRD annual Wealth Professional Canada Certification Survey reveals that there are clear trends developing in the industry. The consensus among financial advisors pursuing further education in their field seems to be that not all designations are created equal. There’s a host of different accreditations available in Canada, ranging from specialist offerings like Trust and Estate Practitioner [TEP] to more broad courses like Certified Financial Planner [CFP]. This is both a positive and a negative in the eyes of many advisors – while choice is usually a good thing, too many different certifi-

industries such as medicine, law or accountancy, those standards are upheld through a requirement for specialized designations.

For financial advice, no such obligations are set in stone. In 2017, perhaps the time has arrived to change that.

Certifications to strive for While financial advisors aren’t obligated to take certain certification courses, the vast majority of our respondents have gravitated toward the Certified Financial Planner [CFP] designation. The difference between a financial advisor and a financial planner

“We believe ‘advisor’ is a very generic term, but to call yourself a financial planner, there should be a minimum standard, which I think is the CFP” Cary List, FPSC cations can dilute the value of obtaining one. Accordingly, many of this year’s survey respondents called for consolidation of the different designations.

The job of a financial advisor is becoming increasingly complex, and further training will be necessary to thrive in what is a transformative period for the industry. Most believe this can be achieved by updating the current framework, rather than adding more courses, which are costly in terms of both time and money. The main issue for the profession seems to be a desire to be seen as just that – a profession, held to certain standards the public can rely on. In other

might look like mere semantics, but the presence of the CFP suggests otherwise. The course is operated by the Financial Planning Standards Council, and the association’s president and CEO, Cary List, considers it to be a cornerstone of the profession.

“First and foremost, the CFP was created to be credible as a professional credential,” he says. “It wasn’t an afterthought just to give credibility to an association. Our organization was created for the sole purpose of creating a legitimate, professional designation.”

Earlier this year, the subject of just who can call themselves a financial advisor created quite a bit of controversy. The title

HOW MUCH TIME AND/OR MONEY ARE YOU CURRENTLY SPENDING TO MAINTAIN YOUR CERTIFICATIONS? It’s true that education should be an ongoing process for financial advisors, but having those extra letters beside your name on a business card doesn’t come cheap. While prices vary depending on the designation, it is a considerable cost for many of survey respondents, both in terms of dollars and cents – and, perhaps more importantly, hours and minutes. $1,000 per year and 45 hours Too much time – more than 40 hours per year; around $2,000 per year combined About $3,000 annually. About 15 hours per month, including travel to meetings in major cities 55 hours, $1,600 in memberships, $800 in course fees 120+ education hours a year, $2,000 a year cost A lot – as it should be. Multiple designations mean a cornucopia of CE requirements. Membership dues also add up. It’s thousands of dollars a year for me 30 to 60 hours a year ... $1,500 plus $1,500+ for travel expenses to get to locations

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FEATURES

SPECIAL REPORT “With all of the disruption we are seeing with fintech, advisors needs to be able to work with data analysis to understand why the markets react the way they do” Sue Lemon, CFA Society Toronto isn’t regulated, which is a detriment to the industry, List believes. Being referred to a financial planner has more substance, he says, particularly as it has a designation specifically attached to it.

“We distinguish between a financial planner and a financial advisor,” he says. “We believe ‘advisor’ is a very generic term, but to call yourself a financial planner, there should be a minimum standard, which I think is the CFP. Like a lawyer, doctor or accountant, there is a minimum standard.”

Adding clarity and value In List’s view, greater clarity for the public is essential moving forward. Consumers need

ADVISORS ON THE VALUE OF AN MBA Public perception is changing on an MBA, in my opinion, and much of the course material isn’t directly related to our business.

I’m not sure how much it helps with the financial planning discipline, but I believe it provides tremendous value in terms of running a practice/business.

Provides a solid foundation of accounting, economics and business management.

As with any educational certificate, it at the very least demonstrates an ability to learn and helps the holder understand where to find answers. It is not necessarily an indication of knowledge applicable to a given issue, matter or problem.

There is a great deal of value in understanding economics and finance if one doesn’t already have that knowledge through other degrees or certifications. Sadly, MBAs are not created equal. A CFA charterholder from China can take the same exam on the same day and pass with the same mark as someone who wrote it in Canada. However, an MBA from McMaster is probably worth 1/100th of an MBA from Wharton. On the other hand, the cost of prestigious MBAs allows people to buy degrees through actual prohibitive tuition fees or indirectly through donations, relationships, etc., whereas something like a CFA is a true meritocracy.

WHICH OF THE FOLLOWING DESIGNATIONS DO YOU CURRENTLY HOLD? For anyone considering a career as a financial planner, the CFP designation has become somewhat of a prerequisite. This designation had by the far the highest prevalence among survey respondents, with the CIM a distant second place.

2.52% 2.52% 4.20% 4.20% 4.20% 4.20% 7.56% 8.40% 10.08% 15.13% 19.33% 21.85%

Certified Management Accountant (CMA) Chartered General Accountant (CGA) Chartered Financial Analyst (CFA) Chartered Accountant (CA) Trust and Estate Practitioner (TEP) Registered Financial Planner (RFP) Certified International Wealth Manager (CIWM) Chartered Financial Consultant (ChFC) Personal Financial Planner (PFP) Fellow of CSI (FCSI) Chartered Life Underwriter (CLU) Chartered Investment Manager (CIM) Certified Financial Planner (CFP)

87.39% 0%

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20%

40%

60%

80%

100%

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SMART INVESTING STARTS WITH INVESTING SMARTS ADVISORS WHO HAVE ATTAINED THE CIM... ®

Provide discretionary portfolio management to individual clients who request it, bound by customer-first fiduciary responsibility

Construct portfolios aligned with investors’ life goals, risk tolerance and behavioral biases

Evaluate the merits of both traditional and alternative investments

Have met an educational standard prescribed by securities regulators

TO LEARN MORE ABOUT THE CIM VISIT CSI.CA/CIM ®

®

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FEATURES

SPECIAL REPORT “With the advent of robo-technology that can deal with investment selection and products ... the real value of a human advisor is with that big-picture thinking” Cary List, FPSC

to know exactly who they are speaking to and what they are qualified for before entrusting them with sensitive financial information.

“For financial advisors, you need to take that term up to the level of financial planner or eliminate the term completely,” List says. “It is causing huge consumer confusion – people don’t know what they are getting.”

For those in the business of offering guidance on money matters, be it investment strategy or a holistic financial plan, a certain stigma remains. Many consumers still wonder whether an advisor is little more than a salesperson for mutual funds. Whether that reputation is deserved or not is a matter

of contention, but the only remedy to the problem is to increase standards across the board. The best way to achieve this is through proper training, List says.

“There still is tremendous consumer confusion out there – the masses don’t really know the difference,” he says. “But if there is one thing they know, it is going to be CFP. They recognize the logo and they recognize the brand, and they know it means something.”

While the reputation of advisors clearly can be improved upon, the benefits of seeking professional guidance are obvious, List says. The FPSC is dedicated to raising standards in the industry, which in turn bolsters consumers’ confidence about entrusting their financial future to an expert.

“We did a study over a period of five years on the value of a financial planner. There were over 15,000 Canadians surveyed, and in every instance, people who had comprehensive planning had much higher levels of confidence, were more prepared for an emergency

WHAT CERTIFICATION HAS BEEN MOST USEFUL IN YOUR CAREER? There were no surprises when it came to the designation financial advisors felt has been the most useful in advancing in their career: The CFP is both the most common and the most worthwhile certification in the view of WPC readers.

Trust and Estate Practitioner (TEP) Fellow of CSI (FCSI) Certified International Wealth Manager (CIWM) Certified Management Accountant (CMA) Chartered Financial Analyst (CFA) Registered Financial Planner (RFP) Chartered General Accountant (CGA) Chartered Financial Consultant (ChFC) Chartered Accountant (CA) Personal Financial Planner (PFP) Chartered Investment Manager (CIM) Chartered Life Underwriter (CLU)

0.84% 0.84% 1.68% 1.68% 2.52% 2.52% 2.52% 3.36% 3.36% 4.20% 4.20% 5.88% 66.39%

Certified Financial Planner (CFP) 0%

30

10%

20%

30%

40%

50%

60%

70%

80%

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WHAT DESIGNATIONS DO YOU PLAN TO GET IN THE FUTURE? As Canadian society ages, estate planning is becoming a vital part of any successful practice, and this is reflected in advisors’ answers about the certification they plan to obtain next. The TEP led the way with over 42% of the vote, while the CIM came in second with 18%.

0.84% 0.84% 0.84% 1.68% 3.36% 5.04%

Chartered Financial Consultant (ChFC) Chartered General Accountant (CGA) Personal Financial Planner (PFP) Chartered Accountant (CA) Registered Financial Planner (RFP) Certified International Wealth Manager (CIWM)

8.40% 8.40%

Chartered Financial Analyst (CFA) Certified Financial Planner (CFP)

15.13% 16.81% 18.49%

Fellow of CSI (FCSI) Chartered Life Underwriter (CLU) Chartered Investment Manager (CIM)

42.86%

Trust and Estate Practitioner (TEP) 0%

10%

20%

30%

40%

50%

CAN YOU HAVE TOO MANY DESIGNATIONS? A 30-year veteran of the business, Patti Dolan came into financial advice after stints in accounting and then sales. It wasn’t long before she felt the need to expand her knowledge.

“When I made the move into being an advisor, the Canadian Securities Course was all that was required,” she says. “When I started to work with clients, I realized that I needed more depth, so the CFP seemed the right way to go.”

She isn’t alone in that regard – the vast majority of respondents to WPC’s Certification Survey agreed that the CFP is the most valuable designation. It is far from the only

“It looks great having an alphabet beside your name, but when you try to break that down to a client, it loses its importance” choice available to advisors, however; new courses are being added all the time. The Responsible Investment Association Certificate is one such example, tailored to advisors who serve clients who prioritize ethical investing.

“The RIAC is significant for me, as I was one of the first people to get that designation,” Dolan says. “It is an online

course, but it is a CFA-level course, so it is quite difficult. My practice is built around responsible investing, so it is critical to be authentic.”

Aside from the CFP and RIAC, Dolan also holds CIWM, FCSI and CIM designations – and she admits that some certifications have been more valuable than others. “The CIWM is probably one of the oddest courses I have taken because they kept on modifying it,” she says. “It started off as one designation then kept changing, and clients really have no idea what it is. I have trouble articulating what it is, too.”

After three decades in the investment industry, Dolan is well versed in what it takes to be a successful advisor.

As such, she believes having some accreditations beside your name is preferable, but not essential.

“It looks great having an alphabet beside your name, but when you try to break that down to a client, it loses its importance,” she says. “You may have these designations, but the competence may not be there. You may be really good at writing exams, Patti Dolan but in applying your knowledge to your SAGE INVESTMENT ADVISORS practice, that may not be the same.”

RAYMOND JAMES

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FEATURES

SPECIAL REPORT HOW LONG DID IT TAKE TO ACHIEVE YOUR CURRENT LEVEL OF CERTIFICATION? Advisors are nothing if not diligent – nearly half took five-plus years to earn a designation.

1 year 8.4% 2 years 21.9% 3 years 20.2% 4 years 9.2% 5 or more years 40.3%

and had lower levels of stress. A financial planner is the only profession in the industry that brings it all together.”

Advances in technology and the emergence of AI have many people concerned for their job security, and financial advisors are no different – robo-advisors pose an immediate threat. Increasing the value proposition for clients is an advisor’s only defence against the rise of digital alternatives, which will likely mean additional training.

“If you look at the future of the financial services industry, the provision of financial advice and where advisors are going, with the advent of robo-technology that can deal with investment selection and products, as

well as portfolio rebalancing, the real value of a human advisor is with that big-picture thinking,” List says.

Up for a challenge While most consumers probably wouldn’t recognize many of the designations and certifications analyzed in WPC’s survey, that isn’t the case for the CFA. Becoming a Chartered Financial Analyst is a key goal for many in the investment space. The coursework is famously complex, and the exams are infamous for their failure rate – but earning the designation regarded as the most challenging is part of the allure.

“Financial advisors increasingly take the

ARE SPECIALTY DESIGNATIONS WORTH IT? After 15 years as an IIROC-registered advisor working for Nesbitt Burns, TD Waterhouse and MD Management, Sara McCullough decided to branch out earlier this year and launch WD Development, so she’s keen to add to her professional expertise. Like most financial planners, she is CFP certified, but hopes to further distinguish herself from other advisors through a less well known designation: the Certified Divorce Financial Analyst [CDFA]. Divorce isn’t something people plan for, but it is a reality of modern life. It’s also something that has far-reaching financial ramifications.

“As an industry, we tell clients to come to their advisor whenever they have financial planning questions,”

“I find there are advisors who may have a lot of letters by their name, but they don’t do any planning for clients.

I think it has become too common to have designations” McCullough says. “But when it comes to divorce, I think it’s seen as a legal event that advisors don’t want to touch. I think there is a way we can help clients make good decisions in conjunction with legal advice.”

Proper communication between a financial planner and lawyer means a client will have all their bases covered in the event they do find themselves going through a divorce.

There’s a lot of merit to an effective partnership between the two disciplines.

“I will be working with the local collaborative law

32

association, and that means going to meetings with the lawyers and the clients and doing the financials of what a settlement may mean,” McCullough says. “It opens up a lot of business potential for me because lawyers won’t be interested in working with a planner who doesn’t have the designation.”

Offering guidance to those ending a marriage is only one part of McCullough’s practice, however. A financial plan is unique to an individual and his or her circumstances, and it’s the part of the job McCullough takes a great deal of pride in.

That’s why the first designation she obtained was the CFP, and it’s why she intends to take the Registered Financial Planner course in the near future.

“If the CFP is an undergraduate degree, the RFP would be a master’s,” she says. “On top of an ethics exam and a general case-study exam, you have to submit a plan for peer review. It also gives me access to a different community of people.”

While she believes the RFP designation will certainly add to her practice, McCullough thinks there are plenty of certifications out there that are much less valuable for advisors. Detailed financial planning is a vital but neglected part of the job, in her view, and this has been reflected by the certification-granting bodies in Canada.

“I find there are advisors who may have a lot of letters by their name, but they don’t do any planning for their clients,” she says. ”I think it has become too common to have designations. I don’t think many firms Sara McCullough reinforce the importance of planning WD DEVELOPMENT on a day-to-day basis.”

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CFA,” says Sue Lemon, CEO of CFA Society Toronto. “I think the reason for that is the complexity of how the markets are today and how they are changing. Also, with all of the disruption we are seeing with fintech, advisors needs to be able to work with data analysis to understand why the markets react the way they do.”

As List cited the CFP for raising standards among advisors and planners, Lemon believes the CFA curriculum leaves little doubt as to what is expected for professionals managing other people’s money.

“The one thing that is taught at all three levels of the CFA is ethics – how to react to and apply ethics,” she says. “The designation stands for what benefits the end investor most. Everything in the ethics program

HOW CAN CERTIFICATION COURSES BE IMPROVED? Too many of them; for-profit companies offering them; curricula are poorly designed; CE credit requirements are a money grab and have nothing to do with continuing education.

It should be seamless from province to province and have minimum education requirements for advisors so consumers have a good understanding.

The complexities and benefits of philanthropy in financial and estate planning are currently omitted from training and education.

The problem is the lack of any actual regulation of who can call themselves a financial advisor/planner and a proper governing body. It prevents us from ever being truly regarded as professionals.

“The one thing that is taught at all three levels of the CFA is ethics. The designation stands for what benefits the end investor most” Sue Lemon, CFA Society Toronto

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FEATURES

SPECIAL REPORT is geared on the end investor in terms of meeting their objectives and needs.”

For those who decide to study for the CFA, it is no small commitment. Many of those who have completed the designation compare the time and effort involved to having a second job. Then, of course, there are the exams, likely to be the most difficult test many people ever take.

“The failure rate has tended to stay at around the same level – around 45% to 55%,”

HAVE YOU EVER FAILED A CERTIFICATION EXAM?

HOW WELL DOES YOUR ACCREDITATIONGRANTING ORGANIZATION POLICE AND CENSURE ADVISORS? Not well

Very well

Adequately

No opinion

Sufficiently

Certified International Wealth Manager (CIWM) Fellow of CSI (FCSI) Certified Financial Planner (CFP)

Yes 19.3% No 80.7%

Personal Financial Planner (PFP) Chartered General Accountant (CGA)

EXAM HORROR STORIES At the peak of my financial planning career, I failed the final PFP exam twice, and to this day, I can’t understand how they marked the exams.

My boyfriend dumped me the day before, and I cried through the exam.

Every CFA exam is a horror story.

I was locked out of the beginning of the CFA exam while chatting in the hall.

Back when I was doing my CFA, about 20 minutes into the exam, some person stood up, knocked over their pencil case and said, “I didn’t know it was going to be like THIS!” and stormed out.

WAS YOUR OVERALL EXPERIENCE WITH A CERTIFICATION-GRANTING INSTITUTION POSITIVE OR NEGATIVE? Neutral. I appreciated the knowledge I gleaned; dealing with the granting institution is a necessary evil if I want to keep using the designation Exams were sufficiently challenging Negative ... feels like a cash grab

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Certified Management Accountant (CMA) Chartered Accountant (CA) Chartered Financial Analyst (CFA) Chartered Financial Consultant (ChFC) Chartered Investment Manager (CIM) Chartered Life Underwriter (CLU) Registered Financial Planner (RFP) Trust and Estate Practitioner (TEP)

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FEATURES

SPECIAL REPORT ADVISORS ON PERFORMANCE WPC asked advisors to rate their designations on a scale of 1 (poor) to 5 (excellent) based on nine criteria, from client recognition to best value for the money. Here are the top-scoring designations for each.

COURSE CONTENT QUALITY Average score

RECERTIFICATION SYSTEM 4.19

TOP DESIGNATIONS

Average score

3.49

TOP DESIGNATIONS

CFA

5.00

CA

4.75

CPA

4.75

CFA

4.33

TEP

4.60

CPA

4.25

GOVERNANCE: GLOBAL RECOGNITION

EASE AND COST OF MAINTENANCE

Average score

3.15

Average score

CFA

5.00

RRC

4.50

CA/CPA

5.00

CAIA, CGA

4.33

CFP

4.30

TEP

4.00

TOP DESIGNATIONS

TOP DESIGNATIONS

CLIENT RECOGNITION Average score

3.57

MARKETING AND PROMOTION 2.87

TOP DESIGNATIONS

Average score

2.71

TOP DESIGNATIONS

CPA

5.00

CFA

4.67

CPA

4.67

CA

4.50

CFP

4.15

CPA

3.75

VALUE FOR MONEY Average score

POTENTIAL FOR CAREER ADVANCEMENT 3.89

Average score

CFA

5.00

CFA/CA

5.00

CA/CPA

4.75

CPA

4.75

TEP

4.20

TEP

4.40

TOP DESIGNATIONS

3.37

TOP DESIGNATIONS

CLIENT VALUE-ADD

OVERALL VALUE 3.68

3.92

Average score

CFA

5.00

CFA/CPA

5.00

TEP

4.80

CA

4.75

CPA

4.75

TEP/CFP

4.75

Average score

TOP DESIGNATIONS

TOP DESIGNATIONS

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FEATURES

SPECIAL REPORT TOP THREE DESIGNATIONS IN TERMS OF SERVING THE CLIENT Advisors were united in their support for the CFP’s ability to add value for clients.

1ST

TOP THREE DESIGNATIONS IN TERMS OF PUBLIC NAME RECOGNITION AND MARKETING In regard to client recognition, the CFP and CA shared advisors’ top billing.

CFP

CFP

2ND

(Certified Financial Planner)

(Certified Financial Planner)

2ND

CGA

CA

(Chartered Accountant)

3RD

CLU

(Chartered Life Underwriter)

1ST

(Chartered General Accountant)

CA

(Chartered Accountant)

3RD

CFA

(Chartered Financial Analyst)

WHAT’S KEEPING YOU FROM GETTING EACH OF THE FOLLOWING DESIGNATIONS? Lack of time and money

Repetitive of other designation

Insufficient client recognition

Poor-quality coursework

Insufficient value-add for clients

Outside of my interest/practice

Certified International Wealth Manager (CIWM) Fellow of CSI (FCSI) Certified Financial Planner (CFP) Personal Financial Planner (PFP) Chartered General Accountant (CGA) Certified Management Accountant (CMA) Chartered Accountant (CA) Chartered Financial Analyst (CFA Chartered Financial Consultant (ChFC) Chartered Investment Manager (CIM Chartered Life Underwriter (CLU) Registered Financial Planner (RFP) Trust and Estate Practitioner (TEP)

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DO DESIGNATIONGRANTING ASSOCIATIONS MARKET ENOUGH TO THE PUBLIC ABOUT WHAT THEIR CERTIFICATION MEANS? Advisors expressed an overwhelming desire for greater public awareness of their designations.

Yes 20.17% No 79.83%

The role of an investment professional is constantly evolving. So too must the certification regarded as the industry’s gold standard Lemon says. “That doesn’t seem to be any different globally; it is about the same everywhere. The first two levels are very technical, while the final level has more of a focus on portfolio management and how to construct portfolios. I think it all depends on the background people come from, as well as how hard they work and what tools they use to study.”

As markets ebb and flow, and governments and regulators impose different criteria, the role of an investment professional is constantly evolving. So too must the certifica-

tion regarded as the industry’s gold standard, and this is something the CFA Institute puts a lot of time and effort into.

“The institute takes a global sample of practitioners every year and spends time with them, finding out where they think the curriculum should be updated,” Lemon says.

“They also interview a pool of existing charterholders and ask them the same questions, and there is also a very knowledgeable staff in financial education. They combine the three to update the course every year.”

LEARNING A TRADE After leaving the music industry behind and moving into the investment space with Assante seven years ago, Evan Clarke soon realized he would need further training.

“The CIM I got along the way to getting my CFP, which was always the goal,” Clarke says. “To me, the CFP is the gold standard in our industry. I treat planning as a profession, and I consider myself a professional, so I think the CFP designation should be the de facto requirement for licensed planners.”

Clarke, now in his third year as an advisor, explains the difference between the CFP and some of the other certifications out there.

“I don’t see the current licensing requirements as being sufficient to offer much more than transactional support” “You are not just learning about investments, which the CIM gives you,” he says. “With the CIM, it does help on the investment side and gives you the opportunity to work toward discretionary management. The CFP exposes you to more of the realities of planning. It is more conducive to real conversations you have with people.”

The advisory business is clearly in a state of flux, but Clarke sees the changes as a chance to improve the reputation of the industry, particularly through more stringent licensing requirements.

“The industry is morphing and establishing itself as a

profession, so the hope for me is that it will be a recognized profession in time and we can hold ourselves to higher standards,” he says. “I don’t see the current licensing requirements as being sufficient to offer much more than transactional support.”

Clarke is far from done when it comes to further education in his profession. There are a host of certification options, but he has his sights on two in particular.

“The CLU comes to mind, as it rounds out the insurance side,” he says. “There’s also the Trust and Estate Planning designation [TEP], which is a bit more specialized, but it is something I can see myself getting further on in my career.”

Clarke is also interested in obtaining a Certified Cash Flow Specialist [CCS] designation, which he believes is something younger clients will appreciate.”

“It incorporates cash flow and behavioural finance,” he says. “The focus is on working with people to identify their behaviour, their habits, their spending patterns, their cash flow and come up with a financial plan. I think it is very relevant for my Evan Clarke generation who might not have the RUSSEL FINANCIAL SERVICES assets, so cash flow is incredibly ASSANTE CAPITAL MANAGEMENT important to establish goals.”

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SPECIAL PROMOTIONAL FEATURE

CERTIFICATIONS

Learning never ceases Whether MFDA- or IIROC-licensed, advisors increasingly need additional credentials to further their career

WHAT SEPARATES a financial advisor from a financial planner from a portfolio manager? “Not enough” appears to be the view of the regulators, who are making moves to ensure proper titling in the wealth management space. That means that soon, advisors will likely need to undergo required training in order to use a specific title. Marc Flynn, senior director of regulatory relations and credentialing at the Canadian Securities Institute [CSI], outlines how things are about to change.

yourself out as a financial planner or portfolio manager, for example, then you must have a certain certification and experience.”

Removing any grey area will only benefit consumers. A client might not know what a particular designation means, but new rules will ensure that someone calling themselves a financial planner has achieved a certain level of training.

“I think that will force advisors to decide where they want to be, depending on clientele, and then obtain whatever credentials

“Our feeling is that an MFDA advisor needs to have a financial planning designation to be competitive. In the IIROC world, financial planning or portfolio management designations are the new normal” Mark Flynn, Canadian Securities Institute “The Securities Commissions, the MFDA, the Ontario Ministry of Finance are all very concerned with consumer protection, so they are looking into whether advisors are misleading consumers by using a title when they don’t have the expertise to offer the services the title implies,” Flynn says. “These proposed regulatory changes will limit what people can call themselves, and if you hold

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are approved by the regulator,” Flynn says.

“That is a new dynamic that will impact the whole space in the next 12 to 24 months.”

Most financial advisors in Canada are overseen by the MFDA or IIROC. Now that consumers are increasingly expecting a host of services from their advisor, more and more are electing to go the IIROC route.

According to Marshall Beyer, senior director

of curriculum development at CSI, there has also been a surge in advisors seeking to make the step up to portfolio management.

“Over the past 10 years, there has been tremendous growth in the number of IIROClicensed advisors getting their discretionary licence,” he says. “Ten years ago, it was maybe 7% of the IA population; now it is probably closer to 25% to 30%.”

Having discretionary power over a client’s portfolio – being able to buy and sell stocks without first asking permission – requires a high level of trust. There are clear advantages to such arrangements, however.

“It makes the process of making changes across multiple client portfolios cost- and time-efficient,” Beyer says. “That contributes

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to higher levels of advisor and firm productivity. It also frees up time for the advisor to provide other wealth management advice.”

Novice advisors will have to earn their stripes before even contemplating discretionary management. IIROC investment advisors who want to offer such a service must first obtain a Chartered Investment Manager [CIM] or Chartered Financial Analyst [CFA] designation.

“Within the IIROC licensing regime for an investment advisor, you meet the initial licensing requirement with the Canadian Securities Course and the Conduct and Practices Handbook Course,” Beyer says.

“Within 30 months of being registered, you then have to do CSI’s Wealth Management

Essentials Course. The CIM is built off that WME course.

“Wealth Management Essentials has two main themes – financial planning and investment management,” he continues. “In the IIROC world, you are expected to know both.

After that, it is a question of choice in business or clients as to where advisors go next.

Some go for a financial planning designation, while others go for the CIM to have that discretionary ability.”

Advisors on the MFDA side can also add further credentials to improve their value proposition for clients. One of the most popular paths is the CSI’s Personal Financial Planner [PFP] designation. More than 4,000 advisors hold this designation; Flynn says it’s

a logical next step for many advisors after the Canadian Securities Course or mutual fund licensing courses.

It’s clear that no matter if an advisor elects to align with IIROC or MFDA, training never stops. In a constantly evolving industry and amidst proposed regulatory restrictions, additional credentials will be a matter of course, Flynn says.

“Whether you’re talking about robo-advice or CRM2 or having to defend fees and meet the increasing expectations consumers have,” he says, “our feeling is that an MFDA advisor needs to have a financial planning designation to be competitive. In the IIROC world, financial planning or portfolio management designations are the new normal.”

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31/08/2017 10:01:45 AM

SPECIAL PROMOTIONAL FEATURE

INSTITUTIONAL-STYLE INVESTING

Follow the institutional money Sentry Investments’ James Dutkiewicz discusses how individual investors can adopt a strategy like the huge public pension plans

CANADA’S PUBLIC pension funds are world renowned for their investment clout and approach to asset allocation. The top eight pension funds, collectively known as the Big Eight, have assets under management of $1.7 trillion. But that scale doesn’t preclude individual investors from taking guidance from the CPPIB or the Ontario Teachers’ Plan

Portfolio, Sentry Balanced Income Portfolio, Sentry Growth and Income Portfolio, and Sentry Growth Portfolio – the firm is hoping to attract investors looking for more active management and long-term thinking.

James Dutkiewicz is chief investment strategist at Sentry and part of the asset allocation committee for Personal Pension

“We are trying to keep people from trading in and out of the market and in and out of asset classes. It is challenging for us to constantly look at opportunities versus risks in these different markets, but that’s our job” James Dutkiewicz, Sentry Investments – quite the opposite, in fact.

Sentry Investments has launched a Personal Pension Portfolios lineup for those seeking to adopt a similar strategy to those used by Canada’s largest institutional players.

With five portfolios in total – Sentry Defensive Income Portfolio, Sentry Conservative Income

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Portfolios, alongside CIO Gaelen Morphet and investment strategist Andy Nasr. He explains how these funds are differentiating themselves in a crowded mutual fund space.

“We are attempting to separate the noise from the signals,” he says. “By including some of the more nontraditional parts of the market,

we can look for long-duration, interestaccruing securities to match the longerduration nature of the retirement liabilities everyone has.”

In terms of fund construction, the Sentry portfolio managers have decided to take a different approach than many of their competitors. Instead of using a fund-of-fund strategy, the team relies on a concentrated portfolio of 250 to 300 names across the five funds. After that, the funds are built focusing on nine different areas of the market – fixed

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income, core and high-yield; US, Canadian and international equities; and real estate, infrastructure, energy and precious metals.

The four sleeves of real estate, infrastructure, energy and precious metals are used to create funds that have a similar asset allocation to Canada’s huge public pension plans. The various exposures will then be updated depending on how the markets look at any given time.

“We have decreased our dedicated exposure to energy,” Dutkiewicz says. “As we

observed a modest movement on oil over the past six months from $40 to $50, we came to a decision that we are unlikely to see that bounce continue to $60 or $70. So in the winter, we reduced our exposure to energy and moved more into international, which effectively meant Europe.”

A changing interest-rate environment in Canada and the US also necessitated a shift in fixed-income strategy across the funds.

The major political shock in Washington last November dictated a change in direction

on bonds, but recent central bank policy has meant going the opposite way.

“We took advantage of the significant rate rise in the US after Donald Trump was elected,” Dutkiewicz says. “When US government bonds rallied and the rates came down about two months ago, we established a short-duration strategy within fixed income.”

At home, the Bank of Canada’s decision to raise rates was a boon for the Personal Pension Portfolios team, who had foreseen an end to quantitative easing some time ago. The funds had a significant underweight on fixed income, which proved a savvy move when the sell-off in Canadian government bonds took hold. The strategy mimicked that of the public pension plans, which reduced fixedincome exposure and replaced it with longterm real estate and infrastructure bets with high-running yield or some form of built-in inflation protection.

“One of the ways we have been able to run with a little less core fixed income is because we have that exposure, very similar to CPP or Ontario Teachers’, who have dropped their allocation to public bonds by 20% in the last 10 to 15 years,” Dutkiewicz says.

For financial advisors who have long struggled to find returns for clients in the fixedincome world, Personal Pension Portfolios offer another option. “We are trying to keep people from trading in and out of the market and in and out of asset classes,” Dutkiewicz says. “It is challenging for us to constantly look at opportunities versus risks in these different markets, but that’s our job, and we have a large amount of bodies that are immersed in it.”

As he explains, what it really comes down to is advisors entrusting the Sentry team to concentrate on the nuts and bolts of marketwatching across sectors, countries and economic cycles. The goal is to allow financial planners to prioritize the all-important planning side of the job.

“We are trying to remove that burden of advisors trying to figure out whether they should be shifting their clients from US equity funds into European equity,” Dutkiewicz says.

“Inside one of our Personal Pension Portfolios, we perform that function for them and are fully accountable.”

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31/08/2017 10:02:16 AM

SPECIAL PROMOTIONAL FEATURE

ETFs

A smarter approach to ETFs A Canadian ETF expert discusses how Franklin Templeton’s LibertyShares can fill a void for investors RECENT DATA from independent research firm ETFGI reveals that the global ETF/ ETP industry now accounts for assets of US$4.168 trillion. Here in Canada, growth is equally impressive: AUM now exceeds $130 billion, generated by 24 different ETF providers, including one of the newest entrants, Franklin Templeton.

Traditionally, exchange-traded funds were associated with passive, index-tracking products. That reputation seems outdated, however – active and smart-beta products now account for a large (and growing)

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segment of the market. According to Ahmed Farooq, Franklin Templeton’s vice-president of ETF business development, the reasons for this growth are clear.

“The biggest limitation of passive management is on the risk management side and protection on the downside,” says Farooq, who joined Franklin Templeton Investments Canada after spending more than 10 years at BlackRock. “As the markets have risen so high in the last five years, there are some concerns that stocks are overpriced. The bull market will have to stop at some point.”

To help address the needs of an underserved part of the market, the firm recently launched its first smart-beta and actively managed ETFs. On the smart-beta side are Franklin LibertyQT US Equity Index ETF (FLUS) and Franklin LibertyQT International Equity Index ETF (FLDM). The Franklin Liberty Risk Managed Canadian Equity ETF (FLRM) and Franklin Liberty Canadian Investment Grade Corporate ETF (FLCI), meanwhile, provide alternatives for those seeking active management.

Over its 70-plus-year history, Franklin

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and active ETFs had gained a lot of popularity, we wanted our ETFs to help provide downside protection and better risk-adjusted returns,” Farooq says. “With our smart-beta funds, we wanted to develop a multi-factor strategy with some conviction. Rather than taking a single factor or ‘even steven’ approach with the factors, we are using four core factors with a focus on quality. This bias is illustrated by our factor weights – 50% in quality, 30% in value, 10% in momentum and 10% in low volatility.”

On the active side, the ETFs are managed by a deep bench of domestic equity and fixed-income professionals at Franklin Bissett in Calgary. The launch of the investment-grade corporate fixed-income

investors’ portfolios. And because the LibertyShares ETFs are different from many products on the market, Farooq thinks they can complement a variety of investments, including such stocks, bonds, mutual funds and other ETFs. “It’s always good to have complementary products in clients’ portfolios,” he says. “But given the strong run in North American equity markets, we feel that it will be very important to use complementary strategies to help clients achieve attractive, longterm, risk-adjusted returns with downside protection.”

He points to the fact that the US market is up by more than 250% since the start of its bull market eight years ago – but bull

“Given the strong run in North American equity markets, we feel that it will be very important to use complementary strategies to help clients achieve attractive, long-term, risk-adjusted returns with downside protection” Ahmed Farooq, Franklin Templeton Investments Canada

Templeton has earned a reputation as an active manager. Though it may surprise some to see this global investment giant entering the ETF market, Farooq explains the rationale for this move.

“For us, ETFs are just one more way for Canadians to access our investment expertise,” he says. “It is all about giving advisors and investors more choice to build well diversified portfolios.”

But with more than 500 ETFs now available in Canada, how will the firm differentiate itself? “While we saw that smart-beta

ETF looks particularly timely now that both the Fed and the Bank of Canada have begun to raise interest rates. It remains to be seen just how hawkish the central banks will be in the coming years, but it appears the market is entering a period where active managers can prosper.

“We believe that fixed income can be very complex, and many advisors and investors are not comfortable making decisions on things such as the duration makeup of the portfolio,” Farooq says. “We created this product to adjust for those uncertainties and the need for income. Advisors come to us and ask us to manage duration, to make bond selections, to help to maximize yield and performance. This is what FLCI does.”

Franklin Templeton feels that ETF strategies can be core building blocks for

markets don’t run forever, and Farooq believes products with a greater emphasis on downside protection will prove popular and will fuel more growth in the actively managed space.

According to Farooq, regulatory changes, competitive pressures and growing client demand have led more advisors to consider ETFs. Even advisors from mutual-fund-centric backgrounds are now looking at ETFs, and the industry is evolving to meet their needs. With products like the LibertyShares offering, advisors can access actively managed ETFs while maintaining lower costs.

“I think in Canada there will be a surge in demand for active – especially active mandates priced like traditional passive strategies,” Farooq says.

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31/08/2017 10:02:50 AM

PEOPLE

ADVISOR PROFILE

Specialist advice Mark McNulty, president of the McNulty Group, reveals how he built his business by zeroing in on a single group of professionals

MOST FINANCIAL advisors would agree that the early years of the job are the most difficult. Often the difference between those who succeed and those who fall by the wayside is the right kind of teaching. Mark McNulty had an obvious tutor – his father, Barry, was also an advisor. Having his dad in the same office allowed McNulty to learn the ropes and become a specialist without the pressure of driving business.

“He handled making money, so I was able to focus on gaining technical expertise,” McNulty says. “Most people who enter the business don’t have the time to become experts in planning. Not having to generate business right away was my greatest advantage, because by the time I was generating business, I really could add value.”

Working with his father also proved to be an advantage when clients sought the guidance of an experienced advisor rather than a relative greenhorn.

“Initially, you are speaking from textbooks – you don’t have that much credibility,” McNulty says. “It takes a number of years.

Having my father around was a big advantage because if clients had questions they weren’t happy being answered by a 33-year-old, they could talk to him.”

Today, the novice has become the veteran, and as president of The McNulty Group, McNulty is the one doing the teaching. In his opinion, it’s only natural that certain clients prefer an advisor with some grey hairs.

He stresses the importance of patience for advisors who are just starting out.

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“I have some young guys working with me now, and I tell them they are coming along incredibly well,” he says. “But we can’t control the fact that a 60-year-old dentist selling his practice doesn’t really want to hear the opinion of 30-year-old advisor. It just takes a certain amount of time.”

In building the family business, McNulty decided the firm needed to specialize in one profession in particular. Dentists tend to have wealth, but they don’t necessarily know how best to manage it and prepare for retirement.

This has meant some have fallen victim to unscrupulous advisors over the years, which allowed McNulty to develop his practice as a place dentists could rely on.

“Dentists have been targeted by financial advisors for a long time,” he says. “Every other dentist I meet, their initial reaction is they have a hard time trusting advisors because they have been screwed over so many times.

The more those guys who are screwing them over get out of the business, the better the business will be.”

The McNulty Group serves 100 clients,

almost all of whom are dentists. By limiting the number of clients and focusing on just one profession, McNulty believes he can offer a lot more to his clients. He says a financial advisor shouldn’t aspire to be a jack of all trades – rather, like a dentist, they should be a specialist.

“Because all my clients are homogeneous, I can apply their experiences to the next person,” he says. “If a client is making a life decision about selling their practice and retiring, it helps that I have done that hundreds of times with the same kind of people. I really don’t see how all these generalists in our industry survive, because each person is so different.”

When it comes to improving ethical standards in the wealth management space, McNulty believes there needs to be greater consistency in regulation. Presently, he thinks certain parts of the marketplace are smothered in red tape while other areas are ignored, to the ultimate detriment of Canadian consumers. As such, he believes wealth management needs a level playing field.

IN FAVOUR OF FEES Fee-based versus commission-based compensation is a constant talking point in the wealth management business. While it appears regulators are moving financial advice toward a fee-based system, there are many opponents of that policy. Mark McNulty isn’t one of them, however. “The only reason anyone would object to the fee-based system is because they don’t provide value to clients,” he says. “Anytime a client has a question about our fees, we explain that we are ridiculously underpricing the service that we provide. They always end up in agreement.”

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A SPECIALIZED PRACTICE

Of The McNulty Group’s 100 clients, 97 are dentists

The firm is responsible for $300 million of Ontario dentists’ retirement savings

“Because all my clients are homogeneous, I can apply their experiences to the next person. I really don’t see how all these generalists in our industry survive, because each person is so different” “There is too much discrepancy for different financial products,” he says. “The insurance business is like the Wild West; meanwhile, the regulators are being too hard on portfolio managers and investment counselling firms.”

Such double standards are putting consumers at risk, he says, and it needs to be rectified sooner rather than later.

“It becomes difficult to make some investments without going through five different compliance people, but with insurance you can sell someone a product like permanent life insurance that could destroy them financially,” McNulty says. “It’s absurd. Regulation seems to be reactive, and with insurance, any negative ramifications won’t be felt for decades.”

McNulty co-authored the book The Transition Coach 2.0: A Canadian Dentist’s Guide to a Perfect Retirement

He followed that up with his new book, The $6 Million Dentist

He was named Advisor of the Year at the 2017 Wealth Professional Awards

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31/08/2017 10:03:51 AM

FEATURES

LEADING BDMs AND WHOLESALERS

CANADA’S LEADING

BDMs AND WHOLESALERS

JENNIFER BOROS Business development manager Natixis Global Asset Management

IN A NUTSHELL

Wealth Professional Canada spoke to some of Canada’s top business development managers and wholesalers to find out more about how the investment industry is evolving and their role in that change

IN TERMS of investment products, there are plenty of options out there for advisors. While that’s undoubtedly a positive, it can make the selection process challenging. The role of the BDM or wholesaler in connecting advisors with fund providers is therefore crucial, and it’s one that has evolved greatly in recent years.

Much more than simply a salesperson, today’s BDMs and wholesalers must wear many hats. Product knowledge is a must, of course, but those who excel in the role are also highly capable when it comes to portfolio construction. Client expectations have risen for advisors in recent years; the same can be said for BDMs and wholesalers. And

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as with advisors and fund managers, it is commonplace for BDMs and wholesalers to obtain certifications to broaden their investment knowledge.

There are plenty of individuals who are rising to this challenge. The BDMs and wholesalers WP spoke with agreed that their job has evolved over the years, as has their relationship with advisors. Value-add is the primary consideration for those in the wealth management business, and wholesalers have to prove their worth on a consistent basis.

The people highlighted here certainly realize that – they’re not just adapting to change, but thriving in it.

• Boros’ firm, Natixis Global Asset Management, recently launched US and international equity funds through Harris Associates • Natixis also offers multi-assetclass fixed-income and global credit options managed by Loomis Sayles

“As clients are seeing more transparency in their statements, fees are becoming a top topic of discussion”

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KEEPING TRACK of all the new investment product launches would be close to a full-time job for advisors, so it’s much more preferable to deal with a select number of BDMs and wholesalers who understand your investment philosophy.

Jennifer Boros of Natixis Global Asset Management is one such individual. Most recently, her focus has been on the funds managed by internationally recognized firms Harris Associates and Loomis Sayles.

“Natixis Canada launched two awardwinning equity mandates from Harris Associates, including a US equity and international equity, as well as multi-assetclass fixed income and global credit options managed by Loomis Sayles,” Boros says.

“The reception from the advisor community has been warm to the introduction of these quality managers.”

Canada’s mutual fund industry has developed a reputation as being expensive in comparison to other countries. In response, many providers have been lowering management fees on their funds.

“CRM2 has certainly shined a spotlight on fees,” Boros says. “As end clients are seeing more transparency in their statements, fees are becoming a top topic of discussion. We have certainly made it a priority with fee reductions and capping of expense ratios across many of our mandates.”

Fees are far from the only aspect of the business undergoing change – Boros has also observed a significant shift when it comes to technology. “Technology is playing an important role, as clients have more access than ever,” she says. “Rising competition with new players and products, increased regulation, the use of self-service trading platforms, and intergenerational shifts in wealth are all top of mind.”

But some things – like the importance of the advisor-wholesaler relationship – never change. “It’s important that whichever line of work you are in, you work with integrity and come to the table adding real value,” Boros says. “I find that this is what bridges trusting relationships and creates lifelong partnerships.”

CRAIG ADVICE Relationship manager EdgePoint

IN A NUTSHELL • The four portfolios EdgePoint launched its business with remain its full product lineup today • EdgePoint’s funds are Global Equity, Canadian Equity, Global Growth and Income, and Canadian Growth and Income

“Product providers will no longer be able to charge high fees for mediocre products that hug the index”

SINCE ITS formation in 2008, EdgePoint has made a point of focusing on its strengths. The firm started with four portfolios when it launched nine years ago at the height of the financial crisis; today, those four funds remain its sole focus, which has proven popular with clients. In addition to limiting its product suite, the firm also prefers to cultivate strong ties with a select group of advisors who understand what the EdgePoint brand entails. “Rather than trying to be everything to everyone and cater to every need,” says EdgePoint’s Craig Advice, “we chose to develop strong partnerships with a few advisors who share our beliefs.”

For the four funds – Global Equity, Canadian Equity, Global Growth and Income, and Canadian Growth and Income – cost was a key consideration, and Advice believes these products are some of the most affordable among Canadian asset managers. “We agree that fees are too high,” he says, “and EdgePoint prides itself on having among the lowest fees in the industry, including non-HST, lower-tax options for Western Canada.”

Another factor in a smaller operation being able to thrive is technology, which makes a huge support staff unnecessary.

“Technology has allowed us to do more with less,” Advice says. “I wouldn’t be nearly as effective at covering the large geographic area I do without the ability to call up information in the palm of my hand.”

While many of his peers have predicted consolidation under industry giants, Advice is confident that smaller firms like EdgePoint have their place. By maximizing their resources and ensuring that their funds outperform a variety of competitors, he says, smaller firms have no reason to fear the future. “Product providers will no longer be able to charge high fees for mediocre products that hug the index,” he says. “Also, the growth in passive investing could make for some interesting opportunities for those managers who are truly active, bottom-up investors.”

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FEATURES

LEADING BDMs AND WHOLESALERS

CHRISTOPHER MATUGAS Vice-president (wholesaler) CI Investments

IN A NUTSHELL • CI Investments’ best-performing funds over the past year have been Cambridge Canadian Dividend, Signature High Income and Black Creek International Equity • The firm launched the CI Preferred Pricing platform in response to market appetite for lower fees

“I look for advisors who are growing their business, value wholesalers as professionals and view themselves as professionals”

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RELATIONSHIP-BUILDING is a key part of being a successful wholesaler, and Christopher Matugas of CI Investments admits that his relationships with advisors have changed over the years. “The traditional roles of salesperson and client have evolved – gone are the days where the wholesaler was a gatekeeper of information,” he says.

“Advisors are savvier than ever. I look for advisors who are growing their business, value wholesalers as professionals and view themselves as professionals, take and implement the advice I give from a best practice standpoint, and will be an advocate for me within the advisor community.”

Matugas’ most successful funds lately have been the Cambridge Canadian Dividend, Signature High Income and Black Creek International Equity. “Each of these funds have common themes: They will all complement existing portfolios or new ETFs, providing high active share and low correlation to indices,” he says. “They are very difficult to replicate from an individual broker standpoint. It is easy to justify the fee for both the fund and the advisor.”

Asset managers across the industry have being reducing MERs on mutual funds, and CI Financial is no different. Matugas regularly has to justify the management fee on funds, but this is a conversation he welcomes.

“Expenses have come down across the board for a lot of fund companies,” he says.

“We recently launched the CI Preferred Pricing platform that really puts our funds in a competitive position when you get into the larger tickets. I believe we are starting to see a bit of a pushback from our side of the desk – really speaking about the value that the managed money portion of a client’s end portfolio brings to the table.”

Technology has also significantly changed his interactions with advisors. “If I bring a solution to an advisor, he can instantly look up any of the numbers I am speaking about, compare them to my competitors and ask more insightful questions based on the data available online,” Matugas says. “I have to be better prepared and able to speak to these questions.”

CRAIG CLARKE Director, Atlantic Renaissance Investments

IN A NUTSHELL • Clarke helped launch Renaissance Investments’ Flexible Yield Fund, managed by Jeff Gundlach of Doubleline Asset Management • The fund offers fixed-income exposure and has provided a 5.1% return since its inception

“Technology bubble, financial crisis, CRM2 … these are all events in the industry. It’s important to thrive on change”

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DESPITE HAVING more than two decades in the investment industry under his belt, Craig Clarke’s passion for his job remains as strong as ever. While selling investment products is always challenging, he says, it’s a role that is never dull. “This industry constantly evolves, and that’s one of the reasons it’s so exciting,” Clarke says.

“Technology bubble, financial crisis, CRM2 … these are all events in the industry. It’s important to thrive on change – that way, you’re always ready.”

While the value financial advisors provide for their clients is a subject of constant debate, Clarke believes that as long as there is an investment industry, people will seek counsel from specialists.

It his job, therefore, to provide these experts with products they can use to build a balanced portfolio. “I believe there will always be a need for experienced, educated, high-quality, client-focused advice,” he says. “In fact, my mission statement as director for Atlantic is ‘helping advisors and their clients be even more successful.’”

Most recently, Clarke helped launch Renaissance Investments’ Flexible Yield Fund. Managed by Jeff Gundlach of Doubleline Asset Management, the fund is a tactical, fixed-income offering that has provided investors with a return of 5.1% since inception. Clarke believes investment sentiment has shifted this year – with stocks priced so high, many advisors are adopting a bearish strategy. “Advisors have been focusing more on downside protection and steady returns for clients,” he says. “We have a great lineup, and I’ve been using the mantra of one of our PMs: ‘win by not losing.’”

Being a wholesaler in 2017 is a very different proposition than when Clarke started in the business 23 years ago, but communication – in any form – is still a backbone of the job. “Technology has made great enhancements in being an enabler,” he says. “Innovate, use technology, and you can be effective while travelling or working remotely.”

CHARLES BENDALY District vice-president Manulife Investments

IN A NUTSHELL • Earlier this year, Manulife became latest entrant in the Canadian ETF market • Manulife partnered with US-based firm Dimensional Fund Advisors for its multi-factor ETFs

“The relationships and conversations with advisors have been geared more toward providing true value through education”

LIKE MANY of the wholesalers featured here, Charles Bendaly has noticed a shift in his interactions with advisors over the years.

“The relationships and conversations have been geared more toward providing true value through education and not so much toward, ‘What is your best product?’” he says. “We’re providing our clients – more than ever – with market outlooks and themes, asset allocation recommendations, practice management, and strategies and ideas that deal with wealth transfer and retirement. From there, we’re able to tailor the right solution for the end client.”

Earlier this year, Manulife became the latest asset manager to enter the ETF space in Canada, and it put a lot of thought into developing unique products. “We’ve been very strategic in our product launches – we don’t want to just follow fads,” Bendaly says. “We searched long and hard before we made the decision to launch our multifactor ETFs, partnering with US-based firm Dimensional Fund Advisors. DFA is a differentiator with a unique team and a very attractive story.”

Manulife is also branching out into alternatives in response to an increasing desire for diversification from investors of all levels. “We have an alternative solution managed by Standard Life called Global Absolute Return Strategies (GARS) on our platform,” Bendaly says. “There’s a growing demand for alternative solutions that have traditionally been earmarked for high-networth individuals and pension plans, but are now available to the retail investor.”

While asset management will continue to evolve, investors will continue to seek out fund managers who can consistently provide solid returns. “I believe the products that will be brought to market may look different, but on the money management side of things, it will stay the same,” Bendaly says. “As long as we continue to have market cycles, the need and the value of asset managers to provide upside participation – and, more importantly, capital preservation and downside protection – isn’t going anywhere.”

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FEATURES

LEADING BDMs AND WHOLESALERS

WARREN MILES-PICKUP Wealth sales director Sun Life Financial

IN A NUTSHELL • The changing interest-rate environment has prompted a new direction for Sun Life’s fund lineup • New products include an optionsbased fund, a derivatives fund, a private fixed-income fund and an institutional-style fixed income fund

“My role has

changed from pitching products to a more consultative approach that assists advisors in plan implementation”

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SUN LIFE’S Warren Miles-Pickup believes the value proposition of a financial advisor is only going to become more apparent as baby boomers retire and the need for expert guidance grows. “Advisors have been actively addressing concerns for the retiring Canadian population and those already in retirement,” Miles-Pickup says, “so I have been focused primarily on segregated funds and the benefits they can provide through guaranteeing income and bypassing the estate process.”

Over the past year, Sun Life has launched an options-based fund, a derivatives fund through Aviva Investors, a private fixedincome fund and an institutional-style fixed-income fund through Ryan Labs. “The majority of the new launches are designed to address the concerns advisors and investors have with the rising rate environment that we are experiencing in both Canada and the US,” Miles-Pickup says.

The changing regulatory environment in asset management is another key concern for wholesalers. “With the rapid implementation of CRM2, many of the advisors I work with have moved from being solely focused on performance differentiation to being focused on a combination of performance and planning/ service,” Miles-Pickup says. “As such, my role has changed from pitching products to a more consultative approach that assists advisors in plan implementation through a deeper understanding of situational product usage.”

As far as products go, Miles-Pickup foresees even greater complexity with funds.

“With over 16,000 funds available in Canada and the number of ETFs rapidly expanding as well, asset management will need to develop different products that have unique value propositions to maintain fund flows.”

For the sales side of the business, he predicts a thinning of the ranks. “The days of big expense accounts and experiential wholesaling is dead,” he says. “Wholesalers will be valued based on their competitive product knowledge and their ability to add value in a consultative manner.”

JEREMY LOUGHEED Business development manager Invesco Canada

IN A NUTSHELL • Invesco is one of the world’s largest asset managers, with offices in 20 countries and assets of US$858 billion • Lougheed became a BDM after starting his career in client relations

“Advisors’ biggest

challenge will be implementing strategies to become more ‘like-minded’ with their millennial clients”

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HAVING STARTED his investment career in client relations, Jeremy Lougheed was able to glean a great deal of knowledge about financial planning, which has made him a more effective BDM. “The pressure coming down from the regulators, internal compliance and competitors has forced [advisors] to spend less time servicing clients,” Lougheed says. “Since the full imple­ mentation of CRM, I’m finding that more meaningful advisor engagement comes from helping ease the administrative burden they face, along with providing strategies to simplify their investment shelf to more core ideas.”

As a global operation with offices in 20 countries and assets of US$858 billion, Invesco has enviable resources to call on.

This is a key selling point, Lougheed says, as investors seek greater diversification.

“We have seen significant interest amongst our advisors for true global and international equities,” he says. “With uncertainty as to how much longer the bull market will run, advisors are looking to invest in funds that give a true global experience with a high degree of active share when it comes to an active mandate.”

The PowerShares ETF lineup is another important part of Invesco’s business.

“In a world where cost is of particular importance,” Lougheed says, “many advisors are incorporating our ETFs within their models to not only help reduce overall portfolio cost, but also to help as a core investment strategy, as we employ an intelligent indexing methodology within our PowerShares mandates.”

The transfer of wealth from baby boomers to millennials is another top area of concern for advisors. “Millennials are becoming much more data-dependent and personally involved in their financial planning,” Lougheed says. “Advisors’ biggest challenge will be implementing strategies to become more ‘like-minded’ with their millennial clients when it comes to partnering and building investment strategies that align with their needs.”

ALEKS SUI Regional vice-president, sales Invesco

IN A NUTSHELL • The PowerShares suite prioritizes Invesco’s focus toward highconviction active management and intelligent indexing • Sui believes active management will soon be in high demand when the bull market inevitably ends

“I think the industry is looking for innovation.

Just repackaging an old strategy with new bells and whistles is becoming a harder sell”

AS ETFS have emerged as a lower-cost option for investors over the past decade, the mutual fund industry has suffered in comparison. As such, Aleks Sui of Invesco believes mutual funds are in need of a refresh to ensure they maintain a top spot in the future. “Mutual funds have been around since the 1930s in Canada, and the structure has not evolved much in the last 20 years,” he says. “I think the industry is looking for innovation. Just repackaging an old strategy with new bells and whistles is becoming a harder sell.”

Invesco is committed to active manage­ ment, and its product lineup reflects that.

At the same time, the firm clearly believes indexing has its place in a portfolio, too.

“Much of Invesco’s focus has been toward high-conviction active management and intelligent indexing,” Sui says. “We believe these solutions help advisors manage for better client outcomes. We want to ensure we have the right active portfolio managers, as well as securing the right index providers, to match what advisors are looking for.”

Sui acknowledges that meeting the demands of advisors is more challenging than ever in 2017. “Advisors are asking us to customize ETF, mutual fund, PTF, SMA or OM strategies based on how they operate their practices,” he says. “Today there is as much discussion in client meetings about the quality of an investment strategy as about how that strategy is delivered.”

Given the bull market and the growth of passive, index-tracking ETFs, this hasn’t exactly been a golden era for active managers. The only inevitability of a bull market is that it will eventually end, and it’s in a downturn that active management really proves its worth.

“I believe that high-conviction active management will survive criticism and begin to flourish in the future,” he says. “I anticipate that ETF/PTF product structures will see continued growth as advisors shift more toward fee-based and discretionary business models. Simplicity and convenience will be key drivers to adopting the next generation of investment management structures.”

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FEATURES

LEADING BDMs AND WHOLESALERS

ALAIN DESBIENS Vice-president of sales, BMO ETFs, Eastern Canada BMO Global Asset Management

IN A NUTSHELL • BMO AM is second in Canada for ETF assets and the market leader in net creations • Over the past year, the firm has introduced 19 new ETFs

“As an asset management firm, you need to be able to offer a wide spectrum of solutions like ETFs, mutual funds, GICs and alternative products”

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THIS YEAR marks Alain Desbiens’ 25th anniversary in the investment industry, and he’s spent 15 of those years working as a wholesaler. Today, ETFs are his focus – BMO is second only to BlackRock when it comes to ETF assets and is the undisputed market leader in terms of net creations.

Desbiens has played a key role in that growth since joining BMO seven years ago; he was also named Wholesaler of the Year at the 2015 Wealth Professional Awards.

This year has been no less busy for Desbiens – BMO has seen a host of new product launches over the past 12 months. “With the addition of 19 new ETFs, BMO AM now offers 90 listings,” Desbiens says. “Since launching its first ETFs in 2009, BMO AM has captured the most inflows in the Canadian ETF industry for six consecutive years. This year, BMO is still number one in net sales as of June 2017.”

One of the common criticisms of the Canadian mutual fund industry is that it is overpriced. As a wholesaler, Desbiens is aware of this reputation, but he believes the industry is responding in the right way. He points to BMO’s commitment to lower-cost ETFs, including developing courses on ETFs for the MFDA and authoring numerous white papers on the subject. “As an asset management firm, you need to be able to offer a wide spectrum of solutions like ETFs, mutual funds, GICs and alternative products, with different management styles – index, smart beta and active,” Desbiens says. “You need to have scope and expertise to be present and a leader in the Canadian financial industry.”

To truly be considered industry leaders, firms like BMO also need to drive innovation. “With advisors and portfolio managers, we are trying to help them become better digital advisors,” he says.

“With our LinkedIn Guide, we helped thousands of advisors across Canada to be more visible with clients and prospects.

With the BMO ETF Dashboard and Insight, we are reaching thousands of advisors in giving trade opportunities, updates and market insights.”

ABOUT THE COMPANIES EDGEPOINT Owned and operated by investors, EdgePoint launched in 2008 and invests its own money in its products alongside investment partners.

NATIXIS GLOBAL ASSET MANAGEMENT Offering more than 200 investment strategies across 31 international offices, Natixis Global Asset Management has $951.7 billion in net assets as of June 2017.

CI INVESTMENTS Founded in 1965, CI Investments is one of Canada’s largest investment fund companies, with more than $117 billion in assets as of December 2016.

RENAISSANCE INVESTMENTS With two offices in Montreal and Toronto, Renaissance Investments offers a range of products, including Axiom portfolios.

MANULIFE INVESTMENTS Manulife has successfully managed billions of dollars of investments since 1887 and currently has approximately US$370 billion under management as of June 2017.

SUN LIFE FINANCIAL Providing a wide range of protection and wealth products and services, Sun Life Financial is among one of Canada’s largest public companies.

INVESCO CANADA Managing more than $876 billion in assets on behalf of clients worldwide, Invesco has nearly 7,000 employees with on-theground presence in more than 20 nations.

BMO GLOBAL ASSET MANAGEMENT For more than 90 years, BMO has offered clients a broad array of investment solutions. As of March 2017, BMO manages US$243 billion in AUM.

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31/08/2017 10:13:01 PM

SPECIAL PROMOTIONAL FEATURE

TECHNOLOGY

The simple explanation A trailblazer in financial planning software, Dave Faulkner of Razor Logic Systems outlines how technology has evolved to meet advisors’ ever-changing needs

AS FINANCIAL planner Dave Faulkner contemplated a name for his nascent software company, he mused over what his new program would mean for advisors.

Efficiency was one word that immediately sprang to mind, which led him to the principle of Occam’s razor: When faced with two explanations, the simpler choice is usually the best.

Thus, The Razor – a program that prioritized usability, designed specifically for financial advisors – was born in 2010. The product was subsequently rebranded as RazorPlan in 2014, the same year Faulkner’s firm, FPAdvantage, partnered with software engineer Mehmet Baltacioglu to create Razor Logic Systems.

Since then, the company has updated the product frequently to meet the changing needs of financial advisors. Compliance requirements continue to increase the workload for advisors, leaving them with less time to devote to actual planning. This is something Faulkner had firmly in mind when developing the software.

“As a specialist, my value is identifying what you need to do and then developing a plan for you to achieve your goals,” he says.

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“It’s not just number-crunching.”

Faulkner boasts a wealth of experience in the field of financial planning software.

A true pioneer of the industry, he created FP Solutions back in 1989. That program became the standard for financial advisors in Canada, and he later sold the rights to Wolters Kluwer subsidiary CCH Canadian in 2000. After the sale, he returned to the world of financial planning and soon realized that the job had changed considerably. RazorPlan is the result of that epiphany.

“Advisors who use RazorPlan, what they discover very quickly is that it is very usable, very efficient, and clients understand it,” Faulkner says. “In a simple half-hour meeting, clients are engaged and understand what you are talking about. That is the goal: It is about automation, design and the 15-minute rule.”

Since Faulkner first started developing financial planning software in the ’80s using Microsoft Excel, the advances in technology have been exponential. An unfortunate side effect of that progress is that people are much more impatient, including those seeking financial advice. That’s why the 15-minute rule was such an important concept for

Faulkner when he developed RazorPlan.

“I needed to be able to do competent, integrated, complex analysis from scratch in 15 minutes,” he says. “I could then graphically demonstrate to the client where they are today and where they are likely to be in the future, and what they should focus on to achieve their goals.”

Artificial intelligence is the next frontier in tech, and Razor Logic is already making progress in that space, although it’s barely scratched the surface of what’s in store.

“Whatever question the client asks, we have already answered,” Faulkner says. “If they ask, ‘How much do I need to save?’, we have already calculated that. ‘When can I retire?’ We have already calculated it. We have already anticipated all the questions and solved, through an iterative process using basic artificial intelligence, the most commonly asked questions a client might have.”

Aside from usability and speed, another

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“I needed to be able to do competent, integrated, complex analysis from scratch in 15 minutes. I could then graphically demonstrate to the client where they are today and where they are likely to be in the future” Dave Faulkner, Razor Logic Systems major selling point for RazorPlan is its price.

According to Faulkner, his product is the industry’s best in terms of value, especially for an individual advisor who might not have the resources of a huge firm.

“We are by far the most affordable program in the industry for a single financial advisor,” he says. “Where other companies are charging hundreds of dollars per month, we charge $55.”

To help ensure that RazorPlan remains at the forefront of an industry that is constantly evolving, all employees of Razor Logic Systems are either CFP certified or are training for the designation. That means designers, testers and support staff all understand what a financial planner’s job entails and can respond in kind.

The RazorPlan development team is also committed to innovation. Recently,

the company launched client-facing tool RediNest to give advisors using RazorPlan a new way to connect with both existing and prospective clients.

In addition to client engagement, Razor Logic Systems will also be increasing efficiency in the planning process through the use of integration. Faulkner believes RazorPlan and its future iterations will considerably increase the value proposition of advisors, especially in comparison with their digital counterparts.

“Our analysis shows that a financial advisor brings between 1.5% and 2.5% to the return on a portfolio because of their advice on tax savings, efficiencies and encouraging people to save,” he says. “A robo-advisor won’t talk about income splitting; it won’t tell you should be contributing to an RSP instead of a TFSA. All a robo-advisor does is sell you low-cost ETFs, whereas an advisor using RazorPlan can construct a full financial plan tailored to a client’s needs.”

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SPECIAL PROMOTIONAL FEATURE

INDEPENDENT FIRMS

Autonomy a priority for advisors A new poll from Wealth Professional Canada reveals that many financial planners strive for independence and harbour major concerns about increased regulation

WEALTH PROFESSIONAL CANADA’S recent Advisors on Wealth Management poll indicated that there’s a lot of common ground to be found across the industry. That goes for both the positive and the negative sides of the business – advisors were largely in agreement on the changes that should and shouldn’t be made.

When asked the question: “What was it that most attracted you to being a financial advisor?”, 54% of advisors said “helping people,” while 32% said “independence.”

Even more emphatic was the response to the query: “What concerns you most about the advisory business?” – 67% of advisors replied “increased regulations.”

That total will come as little surprise to most financial planners – overzealous regulation is a common topic of conversation.

Advisory firm Echelon Wealth Partners, born out of a marriage between Dundee Goodman Wealth Management and Euro Pacific Canada in 2016, has prioritized making regulation less burdensome for its staff.

That’s part of the reason why Echelon added former finance minister Joe Oliver to its ranks as chairman this summer. A veteran

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of the investment space, Oliver also offers years of experience when it comes to the rules that govern wealth management.

“He is a former executive director of the OSC, a former CEO of IIROC, the founding

amount of red tape in the investment space.

New laws are a fact of life in this business, but that doesn’t mean older legislation needs to remain indefinitely.

“Nobody fights regulation – it is required

“Like any industry dominated by a few players, you inevitably see those players press their advantage, and it usually results in less competitive compensation, higher prices, and reduced options and service” David Cusson, Echelon Wealth Partners CEO of MFDA – there is literally no person in the country with a better perspective on regulation and some of its unintended consequences than Joe Oliver,” says Echelon CEO David Cusson.

In his various roles over the years, Oliver has been a proponent for limiting the

to protect investors,” Cusson says. “But it needs to be proportionate and well thought through for unintended consequences. And when it is no longer a value-add, it should be removed.”

Aside from compliance, the Advisors on Wealth Management poll revealed that the

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issues most likely to drive financial advisors to leave their firm are the compensation model (36%) and a lack of autonomy (35%).

Advisors are increasingly likely to gravitate toward firms that allow them more freedom to conduct business as they see fit.

In Cusson’s view, being an independent shop in Canada means competing with some real giants, but there are plenty of advantages for

advisors who opt to work with a smaller firm.

“Autonomy and compensation models at the banks have become increasingly topical over the last year or so,” he says.

“We’ve observed a number of issues, such as compressing grids, punitive clawbacks on transactional business and even no payout at all for clients under a certain asset threshold.”

Cusson believes such a situation is inevit-

able when there’s a lack of choice in the industry. “Like any industry dominated by a few players, you inevitably see those players press their advantage, and it usually results in less competitive compensation, higher prices, and reduced options and service,” he says.

Despite headaches with compliance and compensation models, most of the respondents to WPC’s survey said they were generally happy with their job. When asked how long they plan to stay with their current firm, 80% of advisors said they intend to stay for more than five years.

Whether they have a choice in the matter is another area of concern. The industry has already endured significant job cuts, and Cusson believes more are on the way. While his firm is actually adding advisory talent, wealth management’s giants appear to be headed in the opposite direction.

“Overall, I think there will be fewer advisor jobs in the industry in 10 years,” he says. “I think a lot of that will come from the banks. I think the term robo-advisor is being used too liberally; it is better characterized as a limited service model. It is delivered electronically, tends to involve very little human interaction and is prepackaged.”

With a constant drive to reduce margins and increase profits, it’s not surprising that the Big Six are looking for an advice model that significantly lowers costs. While it’s likely that there will be fewer financial advisors a decade from now, those who remain will be in a much more specialized profession. For that reason, Cusson remains confident in the future of wealth management.

“The advisor role will continue to evolve into more of a broad professional services type of role,” he says. “We see that movement in the industry broadly, but certainly within our firm. The banks will always have a better balance sheet, will always have a more recognizable brand, but they will never beat us on relationships.”

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SPECIAL PROMOTIONAL FEATURE

FIXED INCOME

Transcending wealth management Provisus Wealth Management’s Transcend platform is now bringing pay-for-performance to the fixed-income space

LAST SEPTEMBER, Provisus Wealth Management shook up the investment business with the launch of its Transcend platform. Responding to consumers’ frustrations that asset management in Canada was overpriced for everyday investors, the firm offered a pay-for-performance model within its equity pooled fund suite.

Under this structure, clients pay a base fee of 0.25%, which covers administrative costs for the various funds used in a Provisus portfolio. If a fund performs better than the benchmark, a performance fee equal to 20% of the return above the benchmark is then charged. It’s a novel approach, and one sure to have many imitators in the future.

So far the response has been great, leading Transcend to expand into the fixed-income space with the Provisus Multi-Strategy High Yield Fixed Income Fund. Subscribing to the

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belief that investors should only pay a nominal amount unless performance results dictate otherwise, the new fund will have the same fee structure as Transcend’s other offerings.

“The returns on bonds over the past few years have been poor, and GIC rates are negligible for clients,” says Chris Ambridge, president and CIO of Provisus. “There are not a lot of options out there in fixed income for people looking for a defensive structure. We have created a fund with lower fees than a bond ETF at 25 basis points. The average MER for a bond ETF is around 28 basis points.”

The fund, which is set to launch on September 30, will hold corporate bonds, convertible bonds, preferred shares, income trusts, REITs, mortgages, secured real-estatebacked lending and infrastructure products, as well as alternative investment strategies

and hedge funds. The investment strategy will generally have a short- to mid-term orientation, or as Ambridge puts it, “essentially the same term structure as a five-year GIC.” Key to Transcend, and the reason it made headlines in investment circles last year, is its pay-for-performance model. The firm takes a great deal of pride in being a trailblazer when it comes to fee structure and offering clients greater transparency. As Ambridge points out, investors using the Multi-Strategy High Yield Fixed Income Fund won’t pay anything above basic management costs until the fund outperforms the benchmark – in this case, 50% of the FTSE Short Bond Index and 50% of the FTSE Mid Bond Index. Ambridge is confident the fund managers at Transcend will achieve their investment goals, regardless of what the Bank of Canada does with interest rates moving forward.

www.wealthprofessional.ca

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“When advisors sell GICs, they get 25 basis points. Here, they can take a larger advisory fee, and clients will benefit from having better performance than with GICs or bonds in isolation” Chris Ambridge, Provisus Wealth Management “The historic performance for the benchmark over the last 10 years or so has been about 4.5%,” he says. “Based on our backtested numbers, we are seeing double that.

When advisors sell GICs, they get 25 basis points. Here they can take a larger advisory fee, and clients will benefit from having better performance than with GICs or bonds

in isolation. GICs from the major banks are yielding about 1%.”

The makeup of the fund will be strictly Canadian, explains Ambridge, a strategy designed to remove any currency risk that could hinder performance; however, it will be diversified in terms of assets through active management. “We are hoping to replace

Canadian bond portfolios and mutual funds,” Ambridge says. “We don’t see the need right now to go outside of Canada – the yields are high enough here to generate sufficient returns for Canadians. We prefer to have our foreign currency exposure on the equity side.”

Catering to retail investors, Provisus now has $440 million in assets under management and has been selected as one of Profit 500’s Fastest Growing Companies in each of the last three years. For those who plan to purchase the fund, it will be available through the same platform that has proven such a success with the firm’s equity pooled funds.

“The fund will be available exclusively through our managed account structure,” Ambridge says. “Having a managed account structure allows Provisus to keep the costs down. Advisors can offer the fund through a referral.”

www.wealthprofessional.ca

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PEOPLE

CAREER PATH

NATURAL-BORN TEACHER Client: Radius Financial Education

Julia Faltico Whether it’s working with clients or passingContact: on his knowledge Phone: 416-723-4229 to a lecture hall full of students, Gerry Ramos has a thirst to educate Email: falotico@radiusfinancialeducation.com Publication: Wealth Professional Full Page ad

Both of Ramos’ parents, who had immigrated from Vietnam, were involved in real estate. He followed in their footsteps at a young age, buying his first property and flipping it for a $100,000 profit at the age of 18 “It was a huge risk. I saw my parents pull themselves up by being entrepreneurs. I remember how hard it was when they got here; immigrants’ choices are limited”

1975

File due date: Wednesday, August 16, 2017

LEARNS THE VALUE OF HARD WORK

2002

HEADS BACK TO SCHOOL Ramos opted out of the industry for two years in order to pursue an MBA at a university in Edinburgh while simultaneously studying for his CFA and CFP designations “I loved every minute of it. When it’s something you enjoy, it doesn’t feel like work. The university was steeped in tradition and had very different standards from North America; it built a lot of confidence in my skill set – I felt like there was nothing I couldn’t do”

2012 HAS A CLARIFYING EXPERIENCE While lighting a fireplace, Ramos’ untucked shirt caught fire, and he was engulfed in flames in seconds.

Third-degree burns covered 30% of his body and ultimately necessitated 15 surgeries “It helped clarify things for me. You realize in those moments what’s important to you, and coming back to work was important to me. I was back at work in less than a year”

2016 TEACHES HIS WAYS Having worked as a part-time lecturer or instructor at Concordia, Queens and the University of Toronto, Ramos added a new line to his lengthy resume when he became a lecturer at the University of Ontario Institute of Technology “It’s a way of giving back, to the industry and another generation.

I didn’t receive a lot of guidance when I was younger – I want to be the professor I wish I’d had”

62

Ad Size: full page 8.25” x 10.875”

Issue: September Art Director: Vic Finucci Phone: (416) 605-7729

2000Email:

finucci@canadianhedgewatch.com

FINDS HIS PATH Several years in various operational positions with financial advisors culminated in Ramos realizing that the path forward led back to school “I liked the business but wasn’t satisfied with my career. I’m good at the planning angle, [but] I realized that without education, I wouldn’t be in front of clients. I was sitting near two portfolio managers who had great jobs and were challenged – and they had ‘CFA’ beside their names”

2007

INVESTS IN PEOPLE Following a successful stint with a mutual fund company that grew to $2 billion, Ramos was drawn to a position as director of training with Altamira, where he was tasked with starting a new advisor training program

“It was about investing in people. The best investments you can make are in people; the reward is seeing them flourish. I realized that helping clients is at the root of what I enjoy – in a client meeting, we are educating clients” 2012

TAKES TO THE WATER Fresh from the hospital and covered in bandages, Ramos bought a 32-foot boat and took up sailing. His new hobby led to the annual Sail for Hope for burn survivors “I’d be sailing alone all bandaged up – even though I struggled, I felt proud. Being out there with nature was almost a spiritual feeling. I thought other burn patients might enjoy it”

www.wealthprofessional.ca

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31/08/2017 10:07:35 AM

16TH ANNUAL PREMIER EVENT

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To register call: WAIS Canada 416-306-0151 / WAIS Bermuda 416-407-1445

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PEOPLE

OTHER LIFE

HIGH STEPPING When she’s not advising clients, Jaclyn Morrison can be found challenging herself in the exacting sport of dressage

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

IT’S UNSURPRISING that the place Jaclyn Morrison feels most at home is in the saddle. Morrison, an investment advisor at HollisWealth in St. Catharines, Ontario, has literally been on horseback since babyhood – while still in diapers, she would ‘ride’ perched in front of her parents. However, her devotion to dressage was born from a desire to constantly challenge herself.

Morrison’s original passion for show jumping gave way to the sport described as “ballet on horseback” due in part to its demanding nature. Excelling at the highly skilled form of riding that calls for the performance of a specific pattern in a

15

Years Morrison has owned her horse, Coby

64

testing arena is the result of “repetition, repetition, repetition.”

“Dressage is a very humbling sport,” Morrison says. “You’re never going to stop learning. You’re constantly competing against yourself.”

Morrison’s record of success is also a testament to the bond she shares with her horse, Coby. “Dressage involves giving the horse a series of cues to execute specific movements and make it look effortless,” she says. “It’s a real partnership between me and the horse.

The biggest compliment for a dressage rider is, ‘You made that look easy’ – I’ve heard that a few times.”

6 to 7

Minutes a typical dressage test takes

67%

Morrison’s most recent dressage test high score

www.wealthprofessional.ca

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31/08/2017 10:10:07 AM

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Risk management meets practice management S E N T R Y

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Managing risk or managing client expectations?

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Aging population. Increasingly complex regulatory and business environment. Investor behaviour that’s counterproductive.

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Winnipeg – September 19 Regina – September 20 Burlington – September 27 London – September 29

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Registration begins at 8:15 a.m. and event concludes at 2:25 p.m.

Space is limited. Sessions are open to financial advisors only and may be eligible for CE credits. Registrations will be accepted on a first-come, firstserved basis; however, your registration will not be accepted if it is contrary to the instruction received from your dealer firm. Sentry, Sentry Investments, the Sentry Investments logo and Calmly create wealth are trademarks of Sentry Investments Corp.

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