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LEADING PORTFOLIO MANAGERS Canada’s top portfolio managers offer their take on the challenges and opportunities on the investment horizon


How to give clients easy access to Google, Netflix, Apple and other tech giants

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What should advisors be doing to foster better relationships with their female clients?


New ways to provide investors with protection against rising interest rates

4/05/2018 10:06:18 AM



Get a global view of Legitimately Active Management®. Access our global solutions with an active discipline to deliver a world of opportunities.


1 YR

2 YR

3 YR

5 YR

10 YR








Dynamic Global Asset Allocation Fund







Dynamic Global Balanced Fund





Dynamic Global Dividend Fund*







Dynamic Global Equity Fund









Dynamic Global Infrastructure Fund







Dynamic Global Yield Private Pool*





Dynamic Power Global Balanced Class






Dynamic Power Global Growth Class







Dynamic European Equity Fund *

Dynamic Global Equity Private Pool Class *


Series F units are only available to investors who participate in eligible fee-based or wrap programs with their registered dealer. *Corporate class versions of these funds are also available. Performance for the class version and a trust version of a fund may differ due to differences in inception dates, and there is no guarantee that the funds will deliver similar returns. Performance as at March 31, 2018. Inception date for Series F of Dynamic European Equity Fund and Dynamic Power Global Growth Class is March 2002. Inception date for Series F of Dynamic Global Asset Allocation Fund is May 2007. Inception date for Series F of Dynamic Global Balanced Fund and Dynamic Global Equity Fund is November 2013. Inception date for Series F of Dynamic Global Dividend Fund is March 2006. Inception date for Series F of Dynamic Global Infrastructure Fund is July 2007. Inception date for Series F of Dynamic Global Yield Private Pool and Dynamic Global Equity Private Pool Class is June 2014. Inception date for Series F of Dynamic Power Global Balanced Class is July 2008. Commissions and trailing commissions are not payable on Series F units of the Fund but management fees and expenses may be associated with these investments. Please read the prospectus before investing. The indicated rates of return are the historical annual compounded total returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemptions, distributions 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. Dynamic Funds® and Legitimately Active Management® are registered trademarks of their owner, used under license and a division of 1832 Asset Management L.P. ™Trademark of its owner, used under license.

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4/05/2018 10:10:14 AM

ISSUE 6.05

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



UPFRONT 02 Editorial


26 22

Keeping financial data safe from fraudsters is a significant challenge



INVESTING FOR A NEW MEDIA REALITY BMO’s latest ETF offering seeks to capitalize on the reclassified communications sector

A cross-section of Canada’s top portfolio managers share their views on active management, global diversification, recent market volatility and more PEOPLE


Doug Warwick, manager of one of Canada’s longest-running mutual funds, reveals how he’s delivered 25 years of solid returns


06 Statistics

What do investors value most in their relationship with their advisor?

08 News analysis

Evidence suggests advisors aren’t doing enough to cater to women

10 Intelligence

This month’s big movers, shakers and new products

12 ETF update

A new ETF hopes to shield fixed-income investors from the effects of rising rates



04 Head to head

How clients are reacting to the government’s latest tax changes



New research reveals two groups advisors need to reach out to

14 Alternative investment update

Hedge funds are looking beyond traditional alpha and beta for returns

16 Opinion

Robo-advisors haven’t exactly taken the industry by storm

PEOPLE 44 Advisor profile

Ghinel Bozek details how she’s found success by specializing in the mining industry

55 Career path

Rob McClelland left a retail career behind for wealth management and hasn’t looked back since


Rocking out with advisor and guitar player Michael Connon



56 Other life


What will market volatility and other emerging trends mean for investors?


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4/05/2018 10:12:49 AM



Getting personal on data


s data security in the wealth management space what it should be? Investors ask themselves that question constantly, but it is difficult to answer. A firm can pour millions into data protection, but just as an antibiotic only keeps a virus at bay for so long, the same is true for cybersecurity and hackers. Those individuals trying to steal your personal information are using increasingly sophisticated means, so it’s a massive task to have the right systems in place to consistently thwart their efforts. But with the Equifax scandal still fresh in the mind, no firm wants to be found in a similarly compromising position. Last month, IIROC issued a warning about fraudsters illegally soliciting trades in binary options and cryptocurrencies while falsely claiming to be regulated investment dealers. Selling binary options is banned in Canada,

“We urge investors to avoid ‘get rich quick’ scams and to be informed and intelligent consumers when shopping for investments or investment advice” following a ruling by the CSA last year. The regulator made that decision due to the level of risk usually involved with these kinds of investments, as well as a high degree of fraud. Those two criticisms are also commonly levied at cryptocurrencies, although many investors have been willing to take a chance, given the potential returns. That leaves them vulnerable to unscrupulous individuals, as IIROC pointed out. “The investment firms and individuals regulated by IIROC must meet our high standards and deal fairly, honestly and in good faith with Canadian investors,” said IIROC president and CEO Andrew Kriegler. “Scammers are showing a reckless disregard for these very standards and are harming investors. We urge investors to avoid ‘get rich quick’ scams and to be informed and intelligent consumers when shopping for investments or investment advice.” IIROC also said the firms in question were seeking personal information from prospective victims, including birthdates, social insurance numbers and banking information, “for the purposes of identity theft.” The fact that so much business is conducted online nowadays means nobody is completely safe from hacking, but there are ways to limit risk. Most notably, consumers need to adopt a cautious approach when sharing personal information, especially when it comes to investing. The team at Wealth Professional Canada ISSUE 6.05 EDITORIAL


Editor David Keelaghan

National Accounts Manager Dane Taylor

Writers Libby Macdonald Leo Almazora Joe Rosengarten

Associate Publisher Trevor Biggs

Executive Editor Ryan Smith

Project Coordinator Jessica Duce

Copy Editor Clare Alexander

CONTRIBUTORS Jin Won Choi Janine Garner Jeremy Streten Matt Malouf

ART & PRODUCTION Designer Marla Morelos Production Manager Alicia Chin Traffic Manager Ella Dayandante

General Manager, Sales John Mackenzie

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

4/05/2018 10:15:53 AM

Echelon Wealth Partners, your wealth management partner in making your life goals possible. Contact an Advisor to discuss your goals. | #empoweryourpossible

Wealth Management - Capital Markets Montreal

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4/05/2018 10:16:01 AM



How did your clients react to the 2018 federal budget? Last year’s proposed tax changes elicited widespread outcry. Are they still rankling small-business owners in their new form?

Rob Tetrault

Cory Garlock Investment advisor TD Wealth

Senior investment advisor Nour Private Wealth/Manulife Securities Inc.

“Most of our business-owner clients were expecting some form of grandfathering for passive income. Most clients are not pleased with the grind on passive income, nor the halt of income sprinkling. There’s a general consensus among my businessowner clients that the government has made their lives significantly more difficult with this move. There’s also a significant concern that some of the advanced tax-planning strategies undertaken in times past might be negatively impacted, and some feel that’s not fair. The silver lining might be that the government stayed away from changes to the capital gains tax rate.”

“My clients include self-employed and medical professionals; they were dismayed by the recent budget. The government is running a deficit and is persistent in its quest for additional revenue sources. Successful business owners and medical professionals are concerned; it appears they are being attacked at every turn. There have to be payoffs for taking risks – otherwise, why take them? The government is going too far in its attempt to equalize and is going to thwart selfemployed and medical professionals from setting up shop in Canada. This is a group of people that we don’t want voting with their feet.”

“There has been a lot of speculation that the government has been considering increasing the inclusion rate of capital gains and eliminating the deduction for stock options, but none of that was included in the most recent budget, which made some clients happy. Business owners were pleased that the new rules regarding passive investment income, income sprinkling and the small-business tax rate were less punitive and complex than previously suggested. Clients are concerned about the government’s need for additional reporting requirements for trusts, [but] no decision affecting these structures was made in this budget.”

Vice-president, portfolio manager National Bank Financial

Elie Nour

BEEF WITH THE BUDGET It didn’t take long for the federal budget, released in late February, to garner some passionate responses. Despite the fact that the latest budget presented a watered-down version of the corporate tax reforms first proposed in July 2017, the Coalition for Small Business Tax Fairness warned that “the approach [on passive investments] outlined in the 2018 budget will create an entirely new group of losers.” The group sent a letter to Finance Minister Bill Morneau in late March, saying, “We urge you not to penalize business owners for past passive investments … legally accumulated over the past several decades, ensuring that those investments are excluded when calculating new taxes going forward.”


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The right advice

OLD HABITS DIE HARD Although investors in Canada have more options to build their portfolios than ever before, the majority still prefer to use traditional mutual funds. For life insurance, permanent products are most popular with consumers who use an advisor.

Clients expect a lot from their financial advisor, but open communication is often what they value most JUST WHAT constitutes financial advice? That’s the question the Investment Funds Institute of Canada [IFIC] sought to address recently with its Anatomy of Advice study. The organization surveyed a cross-section of consumers who use the services of a financial planner to determine why people engage an advisor, the kind of help they receive, and how age, income, experience, and assets influence their behaviour. The study found that most consumers view


of Canadians have an investment portfolio worth less than $10,000


of Canadians have a portfolio worth $1 million or more

‘advice’ as receiving good answers to personal financial questions, and that when clients feel they’re getting advice rather than just information, they’re twice as likely to increase the amount of business they do with a company. Accordingly, IFIC found that clients view an open line of communication as the most important factor in their relationship with their advisor. Clients don’t expect to hear from their advisor every day, but they need to feel that their interests are being looked after.


of Canadians currently do not have any savings or investments set aside for the future


of Canadians have a written financial plan with clearly identified goals Source: CSA 2017 Investor Index



Although an advisor’s job is multi-faceted these days, most clients continue to turn to advisors for help managing investments.

People tend to accumulate wealth as they age, so it’s not surprising that those consumers approaching retirement (ages 50 to 64) are the most likely to hold multiple investment products – and the most likely to seek the expertise of a financial planner. PRODUCT OWNERSHIP BY AGE



70 60 50

Mutual funds








28% 22% 25% 28% 22% 20% 21% 20%

Fixed income




10 Investment management

Financial planning

Wealth management

Retirement solutions

Source: Canadian Investor Research Executive Summary 2017, Investments & Wealth Institute


43% 41%






12% 12% 15%





52% 50%

Age 20–24 Age 35–49 Age 50–64 Age 65+

26% Source: Anatomy of Advice, IFIC

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74% 48% 48%

GICs Fixed income ETFs Annuities

28% 23% 19%

INSURANCE Permanent life

61% 43% 43% 40%

Mortgage/loan life Term life Critical illness

BORROWING Line of credit

71% 68%

Mortgage (home) Personal loan Mortgage (other)

40% 12% 0




40 50 % of respondents






Source: Anatomy of Advice, IFIC



Investments, insurance and borrowing are the three main areas where consumers seek guidance from a professional. And in the investment space, it’s not surprising that the most frequent topic of conversation revolves around changing the amount of money allocated to various products.

Even in an age when people can connect almost instantly using various means of technology, the majority of investors still prefer face-to-face meetings with their advisor.


Seek info/answers Account review Change amount


Admin changes



32% 31%




23% 23%



Buy new product Financial plan



27% 30% 33% 32%


38% 42% 38%

Investments Insurance Borrowing


41% 54% In-person Phone

Source: Anatomy of Advice, IFIC



28% 16% Online Mail Source: Anatomy of Advice, IFIC

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4/05/2018 10:23:28 AM



A gender awakening Women are set to control almost half of personal wealth in Canada over the next decade. So how is wealth management responding? ON MARCH 8, RBC Global Asset Management celebrated International Women’s Day by launching its gender-diversity-focused ETF. The RBC Vision Women’s Leadership MSCI Canada Index ETF (RLDR) joins similar offerings from Evolve Funds and Mackenzie Investments; clearly there is appetite in the marketplace for this kind of product. According to the FPSC, Canadian women will control $3 trillion in assets within the next six years, which is nearly half of total personal wealth in the country. Asset managers have taken note, and funds like RLDR are just the start in what is a new direction for the investment industry – and not before time, believes author and FPSC consumer advocate Kelley Keehn. Women’s views have been neglected for far too long, she says, especially in the advisory space. “I would absolutely say the industry is not as friendly to a woman seeking information,”

yet, but it is changing – slowly.” It’s a subject Keehn – who previously worked in financial services for more than a decade – writes about frequently. Citing data from the Boston Consulting Group, she outlines how the advisory business isn’t adequately addressing the needs of half of the population. “Seventy per cent of women leave their primary financial advisor when their spouse passes away, and that increases to 75% if she is high-net-worth,” Keehn says. “They feel like there was no relationship established. I know that sometimes the woman doesn’t come to the meetings, so it is a challenge for the industry.” It is the advisor’s responsibility, therefore, to ensure they develop a connection with both spouses if they don’t want to be part of that statistic. In Keehn’s opinion, the sexes have different attitudes toward investing and

“The industry is not as friendly to a woman seeking information … It is an industry that doesn’t speak her language yet” Kelley Keehn, author, The Woman’s Guide to Money Keehn says. “Is it because it is an industry that typically talks about investment returns, smart beta and Sharpe ratios, and a woman comes at it in a more holistic way? She wants to know if her family is going to be OK. Unfortunately, it is an industry that doesn’t speak her language


saving, and this needs to be taken on board by an advisor. “It might not be that they want different things – it is that they want to be approached differently,” she says. “[Women] don’t want to be rushed through meetings; they want to

be educated and have their questions met in a respectful way. They also want an advisor to anticipate their needs, rather than this intimidation that many women feel.” Author Barbara Stewart agrees that many advisors need to alter their approach when discussing finances with women. “It is really about speaking the language a woman would prefer to speak,” she says. “Essentially it is finding out what is important to her and what her values are – that’s before you talk rate of return or products.” One of Wealth Professional Canada’s 2017 Women of Influence, Stewart is one of the most highly regarded researchers on the topic of women and finance. Her Rich Thinking white papers are published annually on International Women’s Day, and she speaks

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4/05/2018 10:26:21 AM

WOMEN AND FINANCE A recent study by the Financial Planning Standards Council asked women: “When it comes to feeling financially empowered, what struggles do you face?”

38% said they know “very little” about finance and investment

28% are dependent on a partner or someone else to make ends meet

16% leave the management of household finances and investments to their partner

38% feel uncomfortable negotiating a better interest rate

34% have more debt (outside of real estate) than savings

extensively on gender diversity issues around the world. It’s a focus that’s keeping her pretty busy, to say the least.

drive because driving was seen as a man’s job. Similarly, in the ’70s, investing was seen as a man’s job.”

“Essentially it is finding out what is important to [women] … before you talk rate of return or products” Barbara Stewart, author, Rich Thinking “I’ve never had so many calls in my life on this topic of women in finance,” Stewart says. “There’s a lot of money at stake, and people are scrambling to get into position so they can capitalize on this. If we think about 50 years ago, my mom didn’t know how to

That’s certainly not the case in 2018, and it will be even less so a decade from now. Recent data from Statistics Canada reveals that more than 31% of Canadian women are now working as the primary breadwinner in their household, while a third of the country’s

millionaires are female. As a result, the future of the advisory business will depend on how it can adapt to this new reality, Stewart says. However, that doesn’t mean female clients will naturally gravitate towards female advisors. In wealth management, effective communication is an advisor’s most important skill, and advisors who understand their clients’ needs are those who will succeed in the long run. “Women want someone who can commu­ nicate the way they want to communicate,” Stewart says. “A lot of male advisors are capable of that. There are some excellent male advisors who have strong relationships with female clients, and they get right into a values discussion. These are the very successful advisors.”

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4/05/2018 10:27:14 AM





Canaccord Genuity

Stanley Asset Management

Stanley is Canaccord’s latest acquisition in its continued wealth-management expansion

Purpose Investments

Alliance REIT Management Corporation

Alliance, to be rebranded Purpose Alliance Real Estate Investment Trust, will give Purpose access to the Canadian residential home market




BMO Capital Markets

Clearpool Group

The partnership will allow BMO to enhance its algorithmic trading technology

The Co-operators


Equisoft’s WealthElements suite and Client Portal module are now available to The Co-operators’ network of financial advisors

NEI Investments

Credential Financial and QTrade Investments

The three firms have successfully completed their merger to form Aviso Wealth

Richardson GMP offers Forstrong Global portfolios

Forstrong Global’s core portfolio strategies are now available to advisors at Richardson GMP via the firm’s Separately Managed Account platform. Each portfolio is designed to provide an optimal mix of exposures to developed, emerging, and frontier markets; the new additions will further simplify access to leading-edge, globally diversified portfolios for Richardson GMP clients based on their risk profile. With the agreement, Richardson GMP has become the third major brokerage platform to offer Forstrong’s global macro thematic strategies.

Stanley Asset Management joins Canaccord

Canaccord Genuity has scored another addition to its Canadian wealthmanagement business with the acquisition of Vancouver-based Stanley Asset Management. Headed by lead portfolio manager and senior vice-president Graham Stanley, the six-member team, previously part of ScotiaMcLeod, boasts more than 80 years of combined investment industry experience. The group provides investment strategies for families, institutions, municipalities and corporate entities, including some of British Columbia’s most influential entrepreneurs. “We are delighted that Graham Stanley and his colleagues from Stanley Asset Management have chosen Canaccord Genuity Wealth Management as the platform to grow their business,” said Stuart Raftus, president of Canaccord Genuity Wealth Management in Canada. “The team will benefit from the extensive resources available across our organization and our strong culture of entrepreneurialism and independence.”


Pender Growth Fund seeks reclassification

The Pender Growth Fund is seeking shareholder approval to end its current classification as a non-redeemable investment fund. The reclassification is expected to free the fund from certain limitations under applicable securities law, including restrictions on owning more than 10% of the outstanding equity securities of an issuer or purchasing securities to exercise control over the issuer. The proposal must be approved by at least 50% of shareholders; a vote is scheduled for May 23.

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4/05/2018 10:29:06 AM

PEOPLE Dynamic Funds reduces fees on global equity private pool

Dynamic Funds has announced fee reductions for the Dynamic Global Equity Private Pool Class, which combines four differentiated global equity investment strategies – growth, opportunistic value, equity income and a core strategy – in a tax-efficient portfolio that includes equities from around the globe. Effective May 1, the management fee for the pool was lowered by five basis points to 0.75%. In addition, the fixed administration fee was reduced by five basis points to 0.15% on Series F, FH and I units.





Russell Green

Scotia Capital

Raymond James

Managing director

Emmanuel Jaclot

Schneider Electric


Executive vice-president, infrastructure

Dennis Kavelman


iNovia Capital

General partner

Guy Lemoine



Chairman, Consumer and Investor Advisory Council

Patrick Pichette


iNovia Capital

General partner

Rory Ronan

CIBC Asset Management

1832 Asset Management

Vice-president and portfolio manager

CDPQ names new executive VP

First Asset to terminate three funds in June

First Asset has announced plans to terminate three of its investment funds. The firm has closed the First Asset Global Dividend Fund to new purchases by investors; all issued and outstanding units of the fund will be redeemed by around June 8. “Unitholders may continue to redeem or switch their units in the normal course up to the close of business on the termination date,” the firm said. First Asset is also looking to terminate its First Asset US Equity Multi-Factor Index ETF (FUM) and First Asset Canadian Dividend Low Volatility Index ETF (FDL), both listed on the TSX, around June 11.

Caisse de dépôt et placement du Québec has appointed Emmanuel Jaclot as its executive vice-president for infrastructure. Starting June 1, Jaclot will manage CDPQ’s infrastructure portfolio, worth more than $16 billion in assets. He is also slated to eventually head CDPQ Infra, the pension fund’s subsidiary that develops and operates infrastructure projects. Prior to joining CDPQ, Jaclot held key positions at leading energy companies, including Schneider Electric and EDF Energies Nouvelles. “[Emmanuel has] completed major deals around the world and developed solid operational expertise, particularly in renewable energy,” said Michael Sabia, CDPQ president and CEO. “His arrival gives la Caisse access to an even larger pool of opportunities to continue expanding our global presence in infrastructure.”

VC firm welcomes top tech execs

Portland announces changes to income fund

Portland Investment Counsel has redesignated Series A units of the Portland Global Income Fund as Series A2 units, which have a lower annual management fee. Portland said the redesignation will not result in a taxable event, and Series A2 units will be renamed Series A units following the redesignation. In addition, the firm has lowered the annual management fee on Series F units of the Global Income Fund from 0.85% to 0.65%.

iNovia Capital, a leading Canadian venture capital firm, has hired two new general partners from leading tech companies. Former Alphabet/Google CFO Patrick Pichette (pictured) and former RIM/BlackBerry CFO and COO Dennis Kavelman will lend their expertise to help iNovia’s VC partners scale up. During his seven years at Google, Pichette played a role in more than 200 successful acquisitions, including Motorola Mobility, Nest and Waze. Kavelman, meanwhile, helped grow RIM from just a few employees to a global workforce of more than 14,000 people and $15 billion in revenue. “When startups hit their hyper-growth stage, founders are confronted with high-stakes issues from all fronts,” Pichette said. “I look forward to mentoring and coaching them to help successfully navigate the many challenges of exponential growth.”

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4/05/2018 10:29:13 AM


ETF UPDATE NEWS BRIEFS First Trust introduces blockchain ETF strategy First Trust Canada has introduced the First Trust Indxx Innovative Transaction and Process ETF (BLCK), trading on the TSX. The fund seeks to replicate the performance of the Indxx Blockchain Index, which is designed to track companies poised to benefit or see increased efficiency from material investments in blockchain technology. BLCK will obtain blockchain index exposure by investing in an equivalent US-listed ETF that was launched by First Trust Portfolios in January.

Evolve debuts active fixedincome ETF on the NEO Exchange Evolve ETFs has launched the Evolve Active Core Fixed Income ETF (FIXD) on the Aequitas NEO Exchange. Subadvised by investment management firm Foyston, Gordon & Payne, FIXD seeks income and long-term capital appreciation primarily through investments in debt obligations and other debts issued by Canadian, US and international companies. “FIXD will enhance our existing suite of ETFs by providing investors with an actively managed core fixed-income strategy,” said Raj Lala, president and CEO of Evolve ETFs.

Purpose Investments unveils three new active ETFs Purpose Investments has added three new TSX-listed active ETFs to its product suite. The Purpose Strategic Yield Funds (SYLD) seeks high yield primarily through sub-investment-grade corporate fixedincome securities listed in Canada and the US. The Purpose Multi-Asset Income


Fund (PINC) seeks high income and longterm capital growth via equity and fixedincome assets, as well as alternatives like REITs. Finally, the Purpose Global Innovators Fund (PINV) seeks longterm capital growth through selection, management and strategic sector rotation, as well as trading of global positions in equity, debt and derivatives.

Harvest expands Banks & Buildings fund to the ETF space Harvest Portfolios Group has launched Class A units of the Harvest Banks & Buildings Income ETF (HCBB) on the TSX. The new ETF is based on the firm’s long-running Harvest Banks & Buildings Income mutual fund. HCBB seeks to generate monthly income and maximize total returns through investments in banking issuers, other financial issuers and real-estaterelated companies or REITs listed on recognized North American stock exchanges. “We want to provide our Canadian investors with convenient and lower-cost access to our longest-running income strategy,” said Harvest president and CEO Michael Kovacs.

Brompton finalizes mutualfund-to-ETF conversions Brompton Funds has successfully converted two of its mutual funds, the Global Healthcare Income & Growth Fund and the Tech Leaders Income Fund, to the Global Healthcare Income & Growth ETF (HIG) and the Tech Leaders Income ETF (TLF), both trading on the TSX. Brompton said the conversions will provide investors with several benefits, including increased liquidity, reduced bid/ask spreads, lower MERs and potentially lower expenses per unit.

Staying above the rising-rate tide A new ETF’s active floating-rate strategy presents an additional layer of protection for fixed-income investors As central banks begin to raise interest rates and inflation becomes more of a concern, investors are starting to look for fixedincome products that have measures to reduce the associated risks. Some products soften interest-rate effects through a laddered bond strategy, while others stay within the short-duration end of the spectrum. The new Dynamic iShares Active Invest­ ment Grade Floating Rate ETF (DXV), issued via a partnership between BlackRock Canada and Dynamic Funds, takes a different approach by using derivatives to help neutralize interest-rate sensitivity. “Investors looking to diversify their fixedincome holdings in a climate of rising Canadian interest rates will find DXV a compelling solution,” says Mark Brisley, managing director at Dynamic Funds. “Portfolio manager Marc-André Gaudreau has a long history of using this investment approach, so we are excited to offer this mandate in the ETF format.” DXV’s defensive strategy is similar to the actively managed Dynamic Investment Grade Floating Rate Fund, which Gaudreau and his team have run for nearly five years. “Now, we’re just going back to the ETF format for clients who prefer to gain access to the team through an ETF as opposed to a mutual fund version,” Gaudreau says.

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Brought to you by

DXV invests in a diversified portfolio of short-term investment-grade corporate bonds and uses derivatives to mitigate duration risk, seeking durations of less than a year. By selecting investment-grade securities with an average rating of A, the team also minimizes the fund’s credit risk, making it hardier against a potential economic downturn.

“We’re more liquid, and we can earn more than a typical floating-rate note” “That gives us the best of both worlds,” Gaudreau says. “We’re more liquid, and we can earn more than a typical floating-rate note. Also, the wider range of issuers makes us more diversified by security and by sector.” With a management fee of 30 basis points, the strategy is attractively priced for investors who want to significantly reduce interest-rate volatility while earning a competitive yield compared to other short-term-yield products. In Gaudreau’s view, such considerations are becoming more important as recent moves from central banks indicate a business cycle in its later phases. “Traditional fixed-income solutions will typically yield negative returns as rising-rate pressures increase,” he says. “Floating-rate solutions don’t face that headwind; in fact, overnight rate hikes from central banks are a positive, as the income goes up.”


Tim Huver

Shaping the lowcost landscape


Years in the industry 10 Fast fact Vanguard’s new lowcost asset-allocation ETFs – VCNS, VBAL and VGRO – each invest in seven underlying Vanguard index ETFs

What was the research and strategy behind the development of your new asset-allocation ETFs for the Canadian market? For years, Vanguard has had paper asset-allocation models in Canada, which reflect our best thinking on appropriate allocation across stocks and bonds, based on different risk tolerances and objectives. Over time, clients told us that a low-cost, unitized product implementing those portfolios would be well received, given that they could only access higher-cost mutual funds and more complex products. Because of our experience launching similar products in other markets, we were confident in introducing these single-ticket ETFs in Canada.

What sort of demand have you seen from investors and advisors for the new ETFs? They’ve been among our most popular offerings since their launch in February. For personal investors, they can be an easy, long-term, all-in-one solution; financial advisors can use them as the core of a portfolio, possibly adding satellite positions through active management. I think changes in the advisor space have been a factor in the popularity of these ETFs. More advisors are moving to fee-based advice and are seeking to provide value through holistic financial planning. We have championed this concept of ‘advisor’s alpha’ and the value advisors provide to their clients through themes like behavioural coaching and tax and estate planning. We feel our new ETFs can help them provide better value and focus on important relationship-oriented services.

There’s been a movement toward ETFs with higher fees, which are justified by their use of active or specialized strategies. What are your thoughts on this? We’ve always believed in enduring, broad-based, long-term products, and our asset-allocation ETFs reflect that. When it comes to serving investors, it’s not so much a debate on active versus passive, but one of low-cost versus high-cost. Niche or specialized strategies tend to grab more headlines, but we think the majority of investors have voted with their dollars. Our Canadian investment risk speedometer reports, which track Canadian flows into mutual funds and ETFs, have shown the needle moving toward well diversified products and away from niche offerings. And our research has consistently found low cost among the strongest indicators of investment success.

Do you foresee any competitors following in your footsteps with similar one-ticket solutions? It’s possible; the response we’ve seen definitely indicates an appetite for low-cost and simple solutions. If Canadian fund providers react by lowering their fees, as some competitors in other markets have, we’d welcome it.

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4/05/2018 10:31:35 AM



A smarter approach to using hedge funds Leaders in the space are starting to realize the potential of going beyond alpha and beta

factors that drive them. That insight led to the development of smart and alternative beta products, which provide a similar risk profile as investing in a universe of hedge fund strategies, but are more liquid and lower-cost. “These strategies exploit a common set of factors … but use them to generate entirely different return streams,” the AIMA wrote.

“These strategies exploit a common set of factors … to generate entirely different return streams”

With the rise of low-cost and passive investments, investors and analysts are increasingly questioning hedge funds’ ability to generate returns from stock-picking and market timing. The Alternative Investment Management Association insists that it’s still possible – but it’s time to look for other sources of return. “Purely picking individual securities to gain an edge is increasingly difficult, given the wider availability of once-valuable financial information and the fact that markets are more efficient than in the past decades,“ the AIMA wrote in a recent paper analyzing


insights and outlooks from 25 leading figures in the global hedge fund industry. As information becomes increasingly commoditized and investors’ expectations for immediate success rise, hedge funds have been forced to look beyond the alpha approach. Historically, this would have meant going into pure beta plays – spreading a portfolio’s risk exposure by going across traditional asset classes like equities, bonds and currencies. However, investors are realizing that portfolio diversification comes not from different asset classes, but from the risk

CBi2 launches new REIT focused on cannabis properties

CBi2 Capital has announced a strategic equity commitment in the Industrial Lifestyle Properties Real Estate Investment Trust [iLP]. A newly formed, self-advised, open-ended REIT, iLP focuses on acquiring, developing, owning and managing cultivation facilities, industrial properties and real estate for the legal cannabis industry. CBi2 will provide up to $1 million of capital to iLP and lend its experience in designing state-of-the-art cultivation facilities and navigating the industry’s regulatory framework.


Smart beta products take a passive investment strategy but modify it according to one or more factors, including value, low volatility and momentum. Alternative beta, meanwhile, is a relatively new concept that uses a multi-factor approach to gain higher potential risk-adjusted returns and erase most of their correlation to the markets they invest in. Unlike simpler smart beta products, alternative beta strategies can go both long and short; going long on value and short on growth stocks, for example, has historically generated a positive expected return that’s uncorrelated with the equity market. “With demand likely to stay strong, and amidst rapid advances in technology, this development has the potential to become a major structural growth source for hedge fund firms,” the AIMA concluded.

New VC platform opens for high-networth investors

Canadian venture capital firm Brightspark has opened a new online investor platform for high-net-worth individuals. By pursuing partnerships with wealth management firms, Brightspark says the platform it will allow thousands of accredited investors to invest in the venture capital asset class. Richardson GMP was the first wealth manager to officially sign on; Brightspark managing partner Mark Skapinker called the move “a tremendous validator of both our model and our vision.”

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Antoine Bisson McLernon CEO FIERA COMOX

Years in the industry 16 Fast fact Fiera Comox, established in 2016 by Fiera Capital and Comox Equity, is focused on global investment strategies in agriculture and private equity

Harvesting long-term benefits from farmland What kinds of Canadian investors are seeking access to agricultural investment strategies? Many private wealth investors we deal with have already had some success with land investment close to their hometowns; they typically look for broader global access to agricultural land and the ability to derive current income from different farm sectors. We’ve also gotten attention from institutional investors, as well as family offices, who seek the diversification that comes with having farmland in their investment portfolios.

What benefits can investors gain from investments in agriculture, as opposed to other investments like stocks, bonds or REITs? Looking at the long-term risk-return relationship, diversified portfolios of farmland can provide some of the highest Sharpe ratios of any asset class. We’ve actually seen a diversified US farmland portfolio decline in value only twice over the past quarter-century, with one 3.7% dip during the financial crisis. Real estate and infrastructure projects can begin to depreciate after many years without proper main­ tenance and renovation, but due to secular trends – a growing global population without a corresponding increase in arable land, for instance – farmland tends to appreciate even without capex spending. Because its value is driven by factors that are divorced from the financial markets, farmland also offers great diversification from stocks, bonds and even other alternative asset classes. For investors who

Canadian venture capital sees record first quarter

Funding in the Canadian venture capital space saw a 52% quarterly increase to reach $1 billion in the first quarter of 2018, according to PwC. The 105 deals completed in the quarter represented a 30% surge. Internet-focused ventures represented the lion’s share, with $355 million across 41 deals, followed by mobile and telecom services and noninternet/mobile software. Toronto was the top deal-making region with 38 deals, while Quebec gathered the most capital at $399 million.

worry about inflation, notably pension plans, it’s a useful investment hedge; I’d say agricultural investing today is pretty much where infrastructure was 15 years ago.

Where can investors expect value and returns when it comes to agricultural investments? Most of the assets we’ve bought through our platform have appreciated not just because of a general rise in land values, but also because of increased productivity. Over time, farmland investors can benefit from improved agricultural techniques and equipment; that’s something you can’t get from the commodities market, which tends to have a riskier volatility profile. While commodity prices are a factor, our current returns depend more on factors like finding the best operators to establish joint ventures with. We’re also able to build economies of scale: Our platforms can be worth up to $300 million, and we could acquire $5 million or $10 million parcels of land at a time, which creates nice synergies and cash yields and contributes to capital appreciation as the land becomes more profitable. And agricultural land lends itself well to pivoting based on new opportunities. Changing market forces or disruptive technologies could allow a switch from one agricultural product to another that’s higher-value. Over time, some pieces of land might also become more valuable as real estate. We don’t base our investments on those factors, but they could definitely be a source of value in the long term.

CSA seeks better disclosures for REITs

The CSA is demanding better disclosures about accounting and distributions from real estate investments, including REITs. In reviewing the sector, the CSA found that non-GAAP measures were used for various adjustments to financials. In addition, regulators found around twothirds of issuers either had no description or used boilerplate descriptions of cash sources that were used to fund excess distributions, raising the risk of capitalraising, debt or sale of properties being used instead of operating cash flows.

Canada–US oil price gap could narrow

A new Deloitte report shows that Canadian oil prices have continued to lag behind those in the US. The price gap between West Texas Intermediate [WTI] and Edmonton light oil reached US$7.32 a barrel in January, rising 86% from the average differential of US$3.93 in Q4 2017. However, the firm said the gap could narrow due to the upcoming completion of the Sturgeon refinery, the possibility of crude pipeline operations remaining full and anticipated refinery upgrade support from the Alberta government.

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4/05/2018 10:34:52 AM




The power of word of mouth Anyone who thinks robo-advisors are the future needs to remember the oldest form of communication, writes Jin Won Choi MOST INVESTMENT managers I’ve talked to believe that robo-advisors are the future. It’s easy to see why they think so. In many service industries, new entrants are pushing out old incumbents. The new entrants usually employ sophisticated technology to cut costs and offer lower prices. The incumbents, for various reasons, are often slow to react, and the new entrants win out over the long run. This exact scenario has been playing out in the wealth management industry. Over the past few years, dozens of robo-advisors have sprung up, offering cheaper investment advice. They aim to turn a profit by cutting the costs associated with employing human advisors. Yet robo-advisors haven’t achieved the same smashing success as tech companies in other industries. It has now been 10 years since the founding of Wealthfront and Betterment, which are two of the most successful robo-advisors. A quick Google search reveals that their AUMs stand at $8 billion and $10 billion, respectively. While respectable, that pales in comparison to the AUMs held by large traditional wealth management firms, which generally run more than $100 billion. It’s safe to say that robo-advisors haven’t driven any traditional advisors out of business, and on their current trajectory, they likely won’t. By contrast, Amazon’s presence was felt in the retail industry by its 10th year of operations, and it pushed Borders Group into bankruptcy by its 17th year.


There’s a good reason why robo-advisors have struggled to dominate. Let me explain that reason by first taking you through my own experience as a fintech entrepreneur. In late 2012, I started a company called MoneyGeek, which I envisioned would one day become a robo-advisor. But faced with

All of these internet giants have achieved exponential growth primarily through word of mouth. Think about how you discovered Google or Snapchat. Chances are, you heard about it through somebody you know. In fact, I can’t name one wildly successful internet product that didn’t succeed through word of mouth. Unfortunately, word of mouth is very hard to generate in wealth management. Think about the last time you talked to your neighbour about mutual funds or ETFs. I bet many of us, even though we’re in the financial industry, would be hard pressed to remember. That’s the challenge robo-advisors face in growing their business today. They have thus far grown their AUM through heavy advertising, but it’s unclear that they are getting any return on that investment. They’ve continued to spend those marketing dollars on the premise that once they become big, they’ll find it easier to become bigger.

[Most] internet giants have achieved exponential growth primarily through word of mouth ... Unfortunately, word of mouth is very hard to generate in wealth management the enormous cost of starting a robo-advisor, as well as the difficulty of raising money, I decided to test the concept first. I set up a DIY service that offered model investment portfolios to see how many people would sign up. I initially enjoyed decent success. At its peak, MoneyGeek had roughly 300 members who each paid $70 a year. However, I noticed something once I reached 300 users. Growth slowed down substantially, compared to how long it took for the site to go from 100 to 200 users. This alarmed me because it meant I wasn’t getting exponential growth. All the top technology companies in the world have enjoyed exponential growth, at least early on. It took roughly the same amount of time for Facebook to double its user base from 150 million to 300 million users as it did to double it again from 300 million to 600 million users.

But what happens if their venture capital investors find out that’s not the case? It’s unclear, but I believe we’re about to found out. Already, the value of Wealthfront is said to have dropped by a third since its last capital raise. Such ‘down rounds’ often spell doom for startups. Unless robo-advisors solve the word-ofmouth problem, I think it’s unclear whether they’ll even be viable. As for me, I decided to shut down my paid membership last year and concentrate on providing custom data and software for investment managers. I’ve found that to be a better business so far.

Jin Won Choi is the founder of and, which provides custom data and software for investment managers. He has a PhD in financial mathematics.

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S&PDJI can factor in more Fine-tune your portfolio by combining factor indices that enhance returns and manage risk. S&P DJI provides tools so you can dial your exposures up or down and mix factors with systematic precision. Set your own levels and factor in more.

indexology® syncs up factors © S&P Dow Jones Indices LLC, a division of S&P Global 2017. All rights reserved. S&P ® and Indexology ® are registered trademarks of Standard & Poor’s Financial Services LLC. Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC. It is not possible to invest directly in an index. S&P Dow Jones Indices receives compensation for licensing its indices to third parties. S&P Dow Jones Indices LLC does not make investment recommendations and does not endorse, sponsor, promote or sell any investment product or fund.

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4/05/2018 10:36:36 AM



LESSONS IN LONGEVITY TD Asset Management’s Doug Warwick outlines what goes into building a mutual fund with a 30-year track record

IT’S BEEN a tough few years for active managers. As stock performance has made passive ETFs a safe bet, some investors had started to question the worth of active management. Those naysayers – Warren Buffett the most high-profile example – might have a different opinion now, though, as volatility has returned to the markets. Tracking the index doesn’t do much good when stocks take a dive, as they did in early February, and it’s in this environment that active managers can really shine. Doug Warwick has overseen the TD Dividend Growth fund for the past 25 years. A quarter of a century is a long time in any job, but especially in the mutual fund business. The fund marked its 30th anniversary last September, which is another rarity, but there are solid reasons for its longevity, as Warwick explains. “My tendency is to not buy companies that are cyclical, where possible,” he says. “So if you look through the portfolio, we are light on materials relative to the TSX. We are still a little light on energy and have a heavy emphasis on the financial sector. I think even the worst-performing bank in Canada has outperformed the TSX over almost any time period. And I believe the Canadian banks are one of the few things


that have outperformed Warren Buffett.” The fund’s investment universe is almost exclusively Canadian, which has served it well over the long term, but it comes with certain limitations. “The trouble with those wonderful big tech names in the US – and I wish we owned

to see them shift their business somewhat. “I would really prefer if the Canadian banks would focus less on residential mortgages and more on business and commercial loans,” he says. “Mortgages make up half of a bank’s balance sheet and are probably 22% of a bank’s profitability.”

“I think even the worst-performing bank in Canada has outperformed the TSX over almost any time period. And I believe the Canadian banks are one of the few things that have outperformed Warren Buffett” some, in hindsight – is that the multiples are very high, and only now are they starting to pay dividends. We have a value bent, so it’s difficult for us to pay 30, 40 or 50 times earnings for a stock.”

Focusing on financials Because the TD Dividend Growth fund is principally made up of Canadian stocks, it’s not surprising that it has a heavy financials weighting. The banks have provided solid long-term returns, but Warwick would still like

Although the Canadian banks have strong fundamentals, Warwick’s concern is borne from past events. This year is the 10-year anniversary of the financial crisis, and as he explains, the causes of that collapse aren’t hard to identify. “Mortgage brokers in the US were doing no money down, very low teaser rates and generating as many of those mortgages as they could,” he says. “Then they were bundling them up and flipping them to financial institutions, who were holding their noses

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4/05/2018 10:38:31 AM

PROFILE Name: Doug Warwick Title: Managing director Company: TD Asset Management Based in: Toronto Years in the industry: 37 Fast fact: Warwick has managed the 30-year-old TD Dividend Growth Fund for the past 25 years. The average life of a mutual fund, by contrast, is 8.6 years, while the average term of an active manager is 4.7 years.

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and syndicating that to other people.” Such practices then became a contagion, which put the global financial system under serious threat. And because the US banking system was hugely under-capitalized, a domino effect ensued across the globe. “Every time a bank sold assets to get their capital ratios onside, prices would fall and more assets would have to be sold,” Warwick says. “It was a very scary spiral. My mistake then was not moving a little bit more in cash. From my perspective, Canadian banks were fine, but they were carried down, even though 2008 was the third best earnings year on record.”

home. So on average, the Canadian homeowner is in pretty good shape. The debt-toincome ratio is at record highs, but so is the consumer net-asset-to-income ratio.”

The return of volatility For that reason, Warwick doesn’t believe recent volatility in the markets is a major cause for concern. Last year was an outlier in that there weren’t any significant corrections, so he views 2018 as more of a return to normal. “When you look at how the market goes in a given year, you probably have a 2% to 5% correction every year,” he says. “In February, we had 7% at its very worst. Volatility had

“In this interest-rate environment, we would like to see high single-digit returns. Over 30 years, the fund has outperformed the TSX by an average of 4% per annum, and 3% per annum over the last 10 years, and that’s because of the stocks we buy” The Canadian banking system was held up internationally as an example to follow in the aftermath of the crisis, and the Big Six have gone from strength to strength ever since. Capital ratios are much less skewed in the US, too, and that’s why Warwick doesn’t foresee a repeat of the 2008 calamity anytime soon. That’s not to say there aren’t headwinds investors need to keep an eye on, but generally he is optimistic about the current landscape. “The provinces and the feds in Canada have been very concerned about the housing market and have been making progressively tighter changes to mortgage rules for several years now,” he says. “But I think you have to step back and consider that half of Canadians own their home outright, and the other half who have a mortgage have 40% equity in their



been extraordinarily low, and it is almost like the big hedge funds look for weakness in the markets, and when they see it, they poke it to knock it over and make millions of dollars in a few days.” That period also provided opportunity to add to the Dividend Growth fund; after all, as Warwick says, “The investors don’t pay us to sit on cash.” As for the rest of the year, he is confident he can match the previous results of what has been one of TD’s best performers over the past three decades. “In any given year, and in this interest-rate environment, we would like to see high singledigit returns,” he says. “Over 30 years, the fund has outperformed the TSX by an average of 4% per annum, and 3% per annum over the last 10 years, and that’s because of the stocks we buy.”


Year the TD Dividend Growth fund was launched


The fund’s return since inception, placing it in the first quartile of rankings by Morningstar


The current one-year return on the fund

$1.5 million+

Amount an investor who put in $100,000 into the Dividend Growth Fund in 1987 would have today, compared to a return of $1.1 million from the S&P TSX


Average rate at which companies worldwide have increased dividends since 1912; inflation has increased by an average of 3.3% during this period

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THE BIGGEST, MOST ANTICIPATED EVENT IN THE INDUSTRY CALENDAR Join a stellar community of top industry players and advisors when we announce live the winners of the 4th annual Wealth Professional Awards, the premier independent industry awards in the Canadian wealth management industry. Hosted by “TV’s funniest woman” Jessi Cruickshank To ensure your place, visit: #WPAwardsCA






Portfolios Canada


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4/05/2018 3/05/2018 10:39:44 11:13:54 AM PM



LEADING PORTFOLIO MANAGERS 2018 Wealth Professional Canada spoke to a selection of the best portfolio managers in the industry to get their take on where investors should be putting their money in 2018 DISCRETIONARY PORTFOLIO management is the pinnacle of financial advice. There are various ways to obtain a PM designation, but all involve years of training and a consistent demonstration of excellence in the investment space. Charting strategy for something as capricious as the markets is no easy task, but that’s exactly what a portfolio manager does every day. Portfolio managers must cultivate a high level of trust to earn the responsibility of managing their clients’ financial future. That means providing consistent returns


each year, regardless of how the general indices are performing. Just as important as achieving those returns is doing so without loading on risk. In 2018, performing that difficult balancing act is a bit more challenging. Volatility has returned to the markets, but that’s when the best PMs can truly prove their worth. Accordingly, the individuals featured here have built investment strategies designed to weather any financial storm, demonstrating why their clients have entrusted them with discretionary responsibility.


Raintree Wealth Management


Boos, Shawn

Milestone Asset Management, Canaccord Genuity Wealth Management


Caldwell, Brendan

Caldwell Securities


Conti, Maurice

Heward Investment Management


Dhillon, Jeet

TD Wealth


Horwood, Rebecca

The Horwood Team, Richardson GMP


Moir, Sean

Mandeville Private Client


Orser, Dorothy-Anna Echelon Wealth Partners


Palmer, Sophie

Jarislowsky Fraser


Prittie, Michael

Mandeville Private Client


Sansom, Bruce

Global Wealth Builders


Tonietto, Vincent

Fiduciary Trust Canada


Veale, Jonathan

DeLuca Veale Investment Counsel


Wheaton, Paul

Mawer Investment Management


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Global Wealth Builders was Sansom’s next venture, started in 2002 and still going strong today. While some investors might question the value of active management now that passive options have proliferated, it’s not a strategy Sansom would prescribe.

BRUCE SANSOM Firm: Global Wealth Builders Position: President and CIO Years in wealth management: 64 Years as a portfolio manager: 42

BRUCE SANSOM started his investment career in 1954, so there isn’t much that surprises him when it comes to the markets. Whether it’s Black Friday, the dot-com crash or the financial crisis, Sansom has seen it all in his four decades as a portfolio manager. Even after all this time, the job still excites him, which is why he lends his expertise to the team at Global Wealth Builders in the science of portfolio construction. And when it comes to that task, he believes greater transparency is needed so PMs can make the right calls. “My biggest frustration is the difficulty of obtaining honest and accurate economic data that is not massaged for political purposes,” Sansom says. “It’s a mystery how the nation can advertise 4.6% unemployment but 40% of the labour force is on food stamps. The reported inflation measure is manipulated to understate the actual number. Corporate earnings reports are massaged and adjusted in ways to overstate results. There is too much dishonesty.”

Another frustration for Sansom is the fact that the Canadian economy is too concentrated in only a few sectors. As a PM, he always strives for greater diversification, but that can’t be achieved with any hint of home bias. “Canadian investors are forced to invest internationally to achieve broad diversification,” he says. “Our market is basically financials and resources, which require robust international economic conditions. Such conditions do not exist.” While investing in the Canadian market has its pitfalls, that doesn’t mean Sansom is directing his clients toward less developed nations in search of higher returns. “Investing in emerging markets is riskier and expensive to manage, which dictates reduced exposure,” he says. “These factors reduce both the appeal and opportunity for a meaningful contribution to returns.” Having spent time on the trading floor of the Toronto Stock Exchange, Sansom founded Edmonton’s first investment management firm, Managed Investments, in 1976. The business proved highly successful, amassing nearly $1 billion in AUM by the time it was sold in 1995.

“I believe the increased volatility is a gift to active managers. This is why we exist. ETF investing is like handing the steering wheel to a novice driver and hoping he misses the potholes” “Some clients moved to managers who employ ETFs rather than stock-picking,” he says. “I believe the increased volatility is a gift to active managers. This is why we exist. ETF investing is like handing the steering wheel to a novice driver and hoping he misses the potholes.” Earlier in his career, Sansom specialized in bond trading, so he’s no stranger to the fixedincome space and the challenges it presents today. When Sansom started his journey in wealth management back in 1954, the prime rate in Canada was 4.5%, which seems high by today’s standards, but tell that to an investor in 1981 who was dealing with a rate of 19%. Today the rate is 3.45%, and it’s expected to rise again this year, but it’s what’s happening in the bond markets outside of Canada that gives Sansom the most cause for concern. “The 60-40 split is only outdated due to the low level of interest rates,” he says. “Central bank efforts to normalize rates are an important factor, which we expect to cause catastrophic losses in bond portfolios. This risk is particularly acute in the $10 trillion+ of negative-yielding bonds in Europe and Asia.”

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LEADING PORTFOLIO MANAGERS REBECCA HORWOOD Firm: The Horwood Team, Richardson GMP Position: Director, wealth management Years in wealth management: 38 Years as a portfolio manager: 6 Certifications: CIM

THERE ARE few portfolio managers in Canada who are as synonymous with their firm’s success as Rebecca Horwood. Horwood made her start in wealth management in 1980, becoming the first investment advisor at Toronto-based Richardson Securities. She has remained at the same firm ever since, through various takeovers and mergers, and was a founding partner of Richardson GMP. Now managing $30 billion in assets, Richardson GMP is the largest independently owned wealth management firm in Canada, and Horwood credits that to its approach with clients. What that means is detailed financial planning that goes far beyond stock-picking or product selection. Tax and estate planning is a major focus of the Horwood Team, and it’s only after those particulars receive due attention that the markets become a priority. Now in her sixth year as a discretionary manager, Horwood outlines her central philosophy of portfolio construction. “It’s important to have a portion of our model portfolio invested in high-quality Canadian companies,” she says. “Investing in Canada carries inherent risks – cripplingly high taxation, high exposure to cyclical commodities and a potential housing bubble. I believe that there is risk in having overexposure to any one country in particular – that’s why diversification is so important.” For that reason, the Horwood Team takes a global view when it comes to investing. That approach doesn’t mean using index-tracking ETFs, however. “My goal is for my clients to participate in the upside market and to be protected from market risk – ETFs will not achieve that goal,” Horwood says. “Clients feel all the upside and the downside of the market fluctuations, which can be painful and very volatile. We achieve our goal by having active money management with a brain.”


That active management gives clients market access they otherwise wouldn’t have. “In the early days, we were concerned about liquidity and transparency in corporate governance,” Horwood says. “Since then, emerging markets have matured to the point where they may have some of the best corporate governance in the world and growth projecting 40% from Asia. We like to have active money management on the ground, making decisions for our valued clients.” Another important piece of the Horwood Team’s value proposition is in alternative strategies. It’s a side of the market that investors might be interested in but don’t have the resources to explore themselves. “Portfolios are dynamic, not static,” Horwood says. “We monitor the asset allocation of the major endowments and pension funds, and since we started Richardson GMP, we have full access to the entire universe of investment options. We started with private equity 15 years ago, then moved to real estate, hedge funds and now have a significant investment in private lending.” Responsible investing is another increas-

“My goal is for my clients to participate in the upside market and to be protected from market risk – ETFs will not achieve that goal ... We achieve our goal by having active money management with a brain” ingly popular area where Horwood’s clients can direct their money in 2018. “We also have access to invest in interesting ‘change the world’ impact investments,” she says, “such as private and healthcare companies, Silicon Valley success stories and flow-through shares to lower our clients’ tax bill.”

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“We have done very well for our clients, both lately and in the long term, by investing in top global brands ... While Canada is a great place to live, it does not present well globally as a great place to invest” JONATHAN VEALE Firm: De Luca Veale Investment Counsel Position: Founder, portfolio manager, compliance officer Years in wealth management: 24 Years as a portfolio manager: 15

BEFORE HE decided to open his own firm, Jonathan Veale had already learned the ropes with some of the biggest investment names in Canada. Beginning his career as an advisor with ScotiaMcLeod in 1993, he moved to CIBC Wood Gundy in 1997, where he spent nine years. His partnership with Richard DeLuca followed, and in 2006, DeLuca Veale Investment Counsel was born. Aside from his responsibilities as portfolio manager and co-owner, Veale also serves as the firm’s compliance officer, a task that is increasingly important in today’s regulatory environment. “While we understand the need for an effective regulatory environment, the level of regulation is a great burden on a small firm,” he says. “This leads to fewer small firms and less competition. Application of regulations is also uneven, which leads to consumers getting incomplete or misleading information.” DeLuca Veale Investment Counsel, therefore, prides itself on providing its clients with

all the information they need to prepare for the future. At the moment, the equity markets aren’t the sure bet they have been for much of the last decade, but that’s where expert discretionary management really proves its worth. “We don’t view recent market activities as a shock, per se,” Veale says. “For portfolio managers, market volatility presents opportunities. Have we changed our investment strategy? No, but our portfolio certainly changes as we capitalize on these opportunities.” Fixed income is another area where portfolio managers might have updated strategy over the past year as interest rates have increased. Many believe more hikes are on the way from the BoC this year, but that’s far from guaranteed, Veale says. “I’m not sure we’re in a rising-rate environment – rates certainly have risen, but the future is far from clear on that front,” he says. “We have recently made some minor changes, but our fixed-income strategy is largely driven by capital preservation motivations, so we’re pretty conservative. We’re not willing to take any major position or strategy risks in order to capture a minor increase in rates.” Something else Veale’s clients can expect

is investment strategy that reaches outside domestic boundaries. Canada is a minor player when it comes to global assets, and this is reflected in Veale’s portfolios. “Sadly, we have not historically been large investors in the Canadian equity markets,” he says. “We have done very well for our clients, both lately and in the long term, by investing in top global brands. The reasons are varied, but suffice it to say that while Canada is a great place to live, it does not present well globally as a great place to invest.” In constructing portfolios, Veale handpicks stocks and bonds, tailoring each portfolio to the specific client. While there has never been more choice in terms of different investment vehicles, that doesn’t mean traditional approaches won’t work in 2018. “The 60-40 split is synonymous with a balanced approach, and it’s not a given that it is outdated,” he says. “If that’s what’s appropriate for a client given their specific circumstances, then that’s what their portfolio will reflect.” Veale uses a “pension mentality” with his portfolios, relying on various asset classes. “Several years ago, we introduced direct investment in institutional-quality real estate into our clients’ portfolios when appropriate,” he says. “This assists in the portfolio management process of wealth growth, preservation and income production.”

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DOROTHY-ANNA ORSER Firm: Echelon Wealth Partners Position: Portfolio manager and senior investment advisor Years in wealth management: 29 Years as a portfolio manager: 8 Certifications: CIM, PFP, FCSI, AIFP

SHIFTING INTEREST-RATE policy from the Bank of Canada is something discretionary managers need to keep on top of for their clients. For all the attention stocks get, it is fixed income that safeguards a portfolio against market volatility. In light of predicted rate hikes in Canada, but uncertainty over long-term central bank attitudes, DorothyAnna Orser of Echelon Wealth Partners outlines her current fixed-income strategy. “For some time we have kept maturities short in our fixed-income investments,” she


says. “This has worked well. Also, we have always liked REITs and allow for up to 15% in that sector. We view this as both a diversifying strategy and an alternative to fixedincome investments.” In the equity space, the activity over the past few months has entailed more client interaction. It’s an important part of a portfolio manager’s job, especially during periods of increasing volatility. “We understood the need to be in more frequent contact with some of our clients, specifically those who still watch their market values from month to month,” Orser says. “We encourage them to focus on the income of the account and, after that, yearover-year market value.”

In terms of geographic exposure, Orser recognizes that Canada is on the second tier of world players. That doesn’t mean she is directing her clients away from the domestic market, however. “We invest up to 30% internationally,” she says. “But, at the end of the day, we realize most clients will be retiring in Canada and will require Canadian dollars. Based on that, we invest in Canadian companies that provide international exposure because a large portion of their growth is outside Canada. To name a few, these include Fairfax, SNC, TD, Inovalis, Dream Global REIT, Aberdeen closed-end bond fund and Opentext.” In terms of securities selection, Orser has used ETFs for the majority of her career,

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so that sector’s current popularity comes as little surprise to her. “We have looked forward to having more ETFs and have used them since the late 1980s when they were in their infancy,” she says. “Like any investment, they have their place and have to be viewed in the context of the market and the client’s objectives. We like to use them for offsetting individual stock/bond selections and also to diversify our portfolios, both domestically and geographically.” Emerging markets are another favourite, as the risks associated with these jurisdictions have subsided in recent years. “We add emerging markets for diversification,” Orser says. “Our biggest concern is lack of regulation, but standards in emerging markets are rising. If you remain with larger companies and watch where the institutions are investing, you can reduce the risk. This is

also where we use ETFs.” In investing in emerging markets, along with alternatives like REITs, Orser aims to provide the kind of diversification that protects her clients’ assets against downside risk. Opinion is split on how long the current market cycle will last, but all discretionary managers will find common ground on the need to have a solid asset mix. “For some time now, because of extended low interest rates, our largest mandate is moderate growth,” Orser says. “Cash can now be up to 20%, using money market and short-term bond ETFs to offset market volatility. For the fixed-income portion – 10% to 30% – we have added private, fully guaranteed fixed-income investments to the mix. In the same way, for equities – 60% to 70% – we have included F-class global balanced funds in our selection.”

“Our biggest concern [in emerging markets] is lack of regulation, but standards are rising. If you remain with larger companies and watch where the institutions are investing, you can reduce the risk”

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4/05/2018 10:42:37 AM


LEADING PORTFOLIO MANAGERS MICHAEL PRITTIE Firm: Mandeville Private Client Position: Portfolio manager, senior financial advisor Years in wealth management: 31 Years as a portfolio manager: 5 Certifications: CFP, CIM, CPCA, FSCI, CIWM

WITH MORE THAN three decades in wealth management to his name, Michael Prittie’s views on the markets carry some weight. One of the first advisors to earn the Certified International Wealth Manager [CIWM] designation in Canada, the Mandeville PM also holds CFP, CIM, CPCA and FSCI designations. Clearly, enhancing his abilities as a portfolio manager is a priority for Prittie, but he feels there are certain aspects of the job that are holding him and his peers back. “Government and regulators seem to want to be involved in everything we do these days,” he says. “The problem with some rules is the law of unintended consequences. Take accredited investor rules: While they do not affect me and my clients, given my registration, they effectively shut out 97% of residents from participating in strategies that create and preserve wealth.” This goes against the principle of making financial advice available to everyone. Both Prittie and his firm, Mandeville Private Client, are adamant that those barriers to entry need to be removed. “If pension plans and the rich can utilize proven strategies and quality sources, is the goal of the private investor really that different?” he says. “Surely there should be some leeway for the average investor to play in the same sandbox.” That sandbox, in this case, is private and alternative investments, which Mandeville specializes in. As market volatility increases, investors need to make sure they are protected from downturns. A solid fixedincome exposure would have provided such balance in the past, but investing is much more complex today, which is where PMs like Prittie stand out. “The vast majority of clients desire exposure to non-correlated asset classes to offset equity


“If pension plans and the rich can utilize proven strategies and quality sources, is the goal of the private investor really that different? Surely there should be some leeway for the average investor to play in the same sandbox” declines when they occur,” he says. “My [investment policy statement] reflects the client’s risk tolerance, time horizon and tax situation, and drives the asset mix and selection process. To augment traditional fixed income, I select quality private/alternative income strategies that provide stable, predicable 6% to 10% annual income yields. I tend to favour these income strategies in registered accounts where annual taxation is not an issue.” Of course, equities still make up the majority of any portfolio, and Prittie prefers not to limit himself when choosing stocks, instead investing wherever the best value is. “In my opinion, there has always been a home bias for Canadians,” he says. “However, our market is so small in the global context that I really try to encourage participation in

the US, Europe and other mature markets. Dominated by resources and financials, we don’t have the opportunities that exist elsewhere – manufacturing and industrials are examples.” Prittie encourages 50% in foreign markets, either developed or emerging. “Certainly, within the long term, silo emerging market exposure can provide higher potential returns through capital growth that offset inflation and defer taxation in a cash account,” he says. “Discussions revolving around geopolitical events, foreign currency, access to information and variability are all on the table when considering this higher-risk strategy. However, for many, the risk-return ratio is acceptable and the additional diversification desirable. ”

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“We take a very conservative and measured approach to building portfolios, and rapid increases of values for stocks, especially those not earning a real return as a business, are very dangerous”

SEAN A. MOIR Firm: Mandeville Private Client Position: Portfolio manager Years in wealth management: 12 Years as a portfolio manager: 2.5 Certifications: CIM, CFA Level 2 candidate

IT’S COMMON in the advisory business for people to follow in their parents’ footsteps. It’s a tough profession to start out in, and mentorship is important. When Sean Moir started his career as an advisor 12 years ago, his father, John, served as his mentor; the two still work together as a team at Mandeville. The younger Moir obtained his portfolio manager designation just over two years ago, and although he has no regrets, he does have some frustration with what that role entails in the information age. “We often spend too much time talking to our partners about why certain things they’ve read online aren’t in their best interest, and

we have to keep them focused on their own scenario and away from the myriad of noise and opinions that exist. If you type anything into Google, you’ll find someone’s opinion backing the bias of your search. This makes it incredibly difficult to tune out and calm your mind as an investor. There’s always something new to factor, accept or dismiss – it never ends, and it raises our collective anxiety.” That anxiety flared up in early February when the markets took a tumble. But the correction wasn’t necessarily a bad thing – Moir saw it as a wake-up call for investors. “We were quite happy to have some of the exuberance that had taken hold from November through January come out of the market,” he says. “We take a very conservative and measured approach to building portfolios, and rapid increases of values for stocks, especially those not earning a real

return as a business, are very dangerous.” The bond markets are another potential minefield, which is why Moir elects to leave fixed-income decisions to third-party global unconstrained managers. As a portfolio manager, he says, it’s important to know when to delegate. “The fixed-income market is very different from the equity market – there’s no public exchange, and there are billion-dollar deals done between large institutions that may not even cross the average investor’s screen,” he says. “The CPP or an insurance company is buying at spreads the average investor doesn’t comprehend.” As a result, Moir ensures that his allocation is in an unconstrained investment vehicle of government/corporate bonds and bank loans of various credit ratings. While fixed income is an important part of any portfolio, there’s a lot more to asset allocation these days than a traditional 60-40 mix. “What we seek to do is build portfolios that consist of negative correlation, whether that’s the difference between growth stocks and value stocks, the difference between equities and government credit, or – as is the calling card of Mandeville Private Client – the difference between publicly traded equity or debt and private equity or debt.”

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LEADING PORTFOLIO MANAGERS “Our portfolios weathered the volatility in early February well ... We plan to move more aggressively into equity markets once we see more attractive valuation levels”

GREG BAINBRIDGE Firm: Raintree Wealth Management Position: Chief investment officer Years in wealth management: 5 Years as a portfolio manager: 1 Certifications: CFA

A YOUNG GUN in the portfolio manager space, Greg Bainbridge is in his first year as a PM. A CFA charterholder, Bainbridge came into wealth management after working with the Edmonton Economic Development Corporation and in Telus Communications’ business solutions division. Today, he holds dual roles with Raintree Wealth Management as chief investment officer and chief compliance officer. Given the changing regulatory environment, it’s a massive responsibility, but not so big that he doesn’t find the time to converse with clients regularly. “A lot of the time we spend with clients focuses on current markets risks, the North American political climate and how we are positioning portfolios,” he says. “New clients are often surprised to see how different our asset allocation profile is relative to their current holdings. We spend a lot of time on


client education and setting the appropriate expectations with clients.” At the moment, Bainbridge is taking a conservative approach by limiting risk across his portfolios in response to the late market cycle. “We are defensively positioned in our portfolios right now because of valuation levels, particularly in the US market,” he says. “Our portfolios weathered the volatility in early February well, as well as the more recent volatility. We didn’t experience nearly as deep a drawdown as the broader market. We plan to move more aggressively into equity markets once we see more attractive valuation levels.” Contrary to many of the other portfolio managers featured here, Bainbridge is confident the domestic market will provide the kind of returns his clients seek. “We believe Canada is poised to outperform the US market over the next full market cycle,” he says. “We have also increased our exposure to international developed markets and emerging markets, which, in our view, offer more promising long-term return poten-

tial than the US market.” In fixed income, the prospect of rising interest rates mean shorter duration is the way to go, Bainbridge says. “We’ve gradually been reducing the duration of our bond portfolios and now hold a duration of under five years,” he says. “In addition, given tight credit spreads, we’ve moved our fixed-income portfolios into higher credit segments.” Emerging markets are another place where Bainbridge sees opportunity. It’s always a risk increasing exposure to these jurisdictions, but no so much as to ignore the potential rewards, he believes. “We are overweight in emerging markets on a relative basis right now,” he says. “Not only do we like EM for its diversification benefits, but it’s also the most cheaply priced market today. Macroeconomic and political risk in these markets is always a concern, which is why we limit our EM exposure to portfolio thresholds lower than our Canadian and US counterparts.” Like many of his peers, Bainbridge believes alternative investments are also an important part of the asset mix. “We use a number of alternatives to traditional equity and bond markets,” he says. “Our absolute return strategy is designed to be market-neutral, using various long/short and arbitrage strategies. In addition, we overlay a tactical return component to our portfolios that takes a view on currency, sectors, countries and asset classes to drive returns.”

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4/05/2018 10:43:48 AM

JEET DHILLON Firm: TD Wealth Position: Senior portfolio manager Years in wealth management: 20 Years as a portfolio manager: 11 Certifications: MBA, CFA

JEET DHILLON’S journey into discretionary management wasn’t exactly traditional. Working at TD Wealth’s head office as strategic manager, she assisted portfolio managers and provided the tools they needed to meet the demands of the high-net-worth segment. It wasn’t until she became a portfolio manager herself that client interactions became a personal responsibility. That was 11 years ago, and today those interactions are natural and vital part of her job. “When we are onboarding a new client, there’s a lot of back and forth so we can put together a portfolio recommendation,” Dhillon says. “It is based on fully understanding the client’s financial situation, what objectives they have and their time horizon.” In recent years, strong performance in the equity markets likely made for content clients. This year is a little different, so it’s important for a PM to keep expectations in check. “Whenever there is volatility, it is natural human behaviour to be a little concerned,” Dhillon says. “As a portfolio manager, it is my job to connect the dots in terms of noise in the markets. So I discuss with the clients our portfolio strategy and how that’s going to achieve the client’s long-term goals.” In constructing a portfolio, Dhillon and her team use strategic asset allocation for each client, factoring in risk tolerance and need for liquidity. “A balanced investor might be comfortable with 50% in stocks, 50% in bonds, and we have a range of 60-40 around that,” she says. “That allows us to make shifts within that range that will allow us to manage risk or provide better opportunities if the markets are looking positive.” At the moment, that allocation, in most cases, will have a heavier weighting in international stocks. “We feel that debt levels are high in the Canadian market and there might

“We feel that debt levels are high in the Canadian market and there might be some shocks due to what is happening with NAFTA. So we shifted a little more to the international space because valuations are much more reasonable from a pricing perspective” be some shocks due to what is happening with NAFTA,” Dhillon says. “So we shifted a little more to the international space because valuations are much more reasonable from a pricing perspective, and some of the concerns we have had with Europe are beginning to subside.” With risk in the equity markets increasing, it’s also important to ensure the fixed-income segment receives attention, Dhillon explains.

“Within the fixed-income space, our bias is towards corporate bonds,” she says. “As rates are going up and the spread between government and corporate is narrowed, there is still better yield potential in the corporate space. Our duration is more shorter-term bonds, because when there is a rising-rate environment, you don’t want to have a lot of long bonds that might take a bigger hit.”

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4/05/2018 10:44:09 AM



PAUL WHEATON Firm: Mawer Investment Management Position: Investment counsellor Years in wealth management: 14 Years as a portfolio manager: 3 Certifications: CFA

NOW IN his third year as a discretionary manager, Paul Wheaton moved into that side of the business after first distinguishing himself as an analyst with Hamilton Capital Partners, Kootenay Capital Management and Gluskin Sheff & Associates. He joined Toronto-based Mawer Investment Management in 2014 and started managing assets for clients the following year. The role of a financial analyst shares some


common ground with portfolio management, but there are just as many differences. In particular, the client interaction that comes with portfolio management is a skill one has to master pretty early. “There is definitely a lack of understanding on what discretionary management entails, particularly from people coming from the brokerage communities,” Wheaton says. “Usually I give an overview of the differences between how I operate versus what they may have experienced at another firm.” There are many reasons why people choose to use a discretionary manager, and time is a major factor. “The clients who come to us want to delegate that responsibility and

not be involved in the day-to-day operation,” Wheaton says. “So we spend a lot of time at the beginning of the relationship to understand their goals and objectives, and then set the investment policy statement to the guidelines that their account will be operated under. From that point, they will be more hands-off than they were used to in the past.” The level of interaction varies between PM and client – some prefer quarterly meetings, while others feel an annual catch-up is sufficient. What might change those arrangements is market sentiment – the current climate is a case in point. “It is certainly a talking point I have had in client meetings – a reminder to check in

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“I’m part of a team of portfolio managers, and we operate very much as a unit. We don’t typically make big changes because our view is that our expertise is understanding companies”

about what your client objectives are, to see if there is too much complacency with the risk level in the portfolio,” Wheaton says. “Now that we have actually gone through a period of volatility, it’s a reminder that markets can go down, so it’s a good time to check in.” Despite that volatility, the way Wheaton approaches his job hasn’t changed much over the past three years. The fundamentals of discretionary management remain, in good markets and bad, which is one of Mawer’s cornerstones. “The philosophy of the firm is that we don’t typically make big changes,” he says. “I’m part of a team of portfolio managers, and we operate very much as a unit. We don’t typically make big changes because our view is that our expertise is understanding companies.” A lot of time and effort goes into picking

the kinds of stocks and bonds that make up Wheaton’s portfolios, and a correction in the market isn’t likely to suddenly make those companies unattractive as investments. It’s investing for the long term, which is exactly what his clients want when they walk in the door at Mawer. “We are very much a bottom-up stockpicking company,” Wheaton says. “We have a 30-person research team that picks the securities and creates the portfolios that I then use for my clients. They are good businesses with a resilient business model, well managed and where we think we can pay a fair price. It can be months to years from initial idea into actual investment. They may come across an idea through a screen and spend a couple of months doing due diligence, but if the valuation isn’t attractive, it will go on the watch list for as long as needed.”

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4/05/2018 10:44:41 AM


LEADING PORTFOLIO MANAGERS SOPHIE PALMER Firm: Jarislowsky Fraser Position: Partner and portfolio manager, private clients Years in wealth management: 19 Years as a portfolio manager: 13 Certifications: CFA

APPROACHING HER 20th anniversary in wealth management, Sophie Palmer believes advisors and portfolio managers provide a vital service that isn’t always acknowledged by the public. “I believe the wealth management sector needs to do a much better job of communicating the unique value we provide clients,” she says. “First and foremost must be how well we are aligned with the key social values that are driving our clients’ goals and objectives.” In addition, she says, the industry’s credibility suffers when unscrupulous advisors are allowed to practice. This can be avoided with more stringent requirements for professional credentials, as well as a clearly defined code of conduct. And then there’s the issue of fees. “Our industry must show professionalism by improving clarity and transparency regarding fees and avoiding any self-serving conflicts of interest,” she says. “In everything we do, we must communicate how much the interests of our clients should come first.” As a PM, it’s Palmer’s responsibility to navigate the various headwinds in the markets on behalf of her clients. While she believes there’s some cause for concern right now, she thinks a prolonged downturn is unlikely. “We had been preparing for increased market volatility – from a very low baseline – as investors become more focused on increasing interest rates in certain parts of the world, alongside rising inflation indicators,” she says. “While this has pressured valuations somewhat, our investment outlook remains unchanged, as we do not see a recession on the horizon. Our basic premise remains that as long as earnings can increase, even at a more moderated pace, markets can slowly appreciate while digesting the changes in the macroeconomic environment. That said, we are likely in the later stages of the business cycle, and we do see some excesses in the valu-


“Canadian companies continue to see a healthy underlying economy, and we continue to have it as the largest single asset allocation in our balanced portfolios” ations of other tangible asset classes, such as residential real estate in certain areas.” In fixed income, Palmer’s position remains the same, regardless of what moves the Bank of Canada might make this year. “The strategy does not change – we still focus on high-quality corporate bonds,” she says. “If rates are rising because of better economic growth, then corporate bonds should outperform. We have a long-term investment horizon, so our focus is more on valuations, and currently we find corporate bond valuation neutral, given the advanced stage of the business cycle.” While some of the other PMs featured here are moving money out of Canada, Palmer believes the domestic market still provides good value for investors.

“Canadian companies continue to see a healthy underlying economy, and we continue to have it as the largest single asset allocation in our balanced portfolios,” she says. “In addition, given some underperformance in the Canadian market in the recent past versus other markets, valuations have moved to a level that is relatively attractive versus other markets.” But that’s not to say a home bias is blinding her to opportunities farther afield. “As longterm investors, we have been allocating funds towards faster-growing markets to take advantage of the benefits of diversification and global leaders in other geographies,” Palmer says. “In particular, emerging markets have become a more substantive part of our asset mix in recent allocations, along with meaningful exposures to other global markets such as the US.”

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“For the last decade, we have had a significant investment in the Bombay stock exchange, and if we are famous for anything, it is holding positions in stock exchanges around the world”

BRENDAN CALDWELL Firm: Caldwell Securities Position: President and CEO Years in wealth management: 25 Years as a portfolio manager: 23 Certifications: CFA, CSI

AS PRESIDENT and CEO of Caldwell Securities, it is Brendan Caldwell’s belief that investing should never be parochial. When searching for the right companies to fit his strategies, he doesn’t limit himself. “We look at the whole portfolio, not in terms of having so much in Canada or the US, but where are the best value opportunities, regardless of what countries they are in,” he says. At the moment, many of those opportunities are in emerging markets – and one nation in particular. “The most exciting area we are investing in is India,” he says. “For the last decade, we have had a significant investment in the Bombay stock exchange, and if we are famous for anything, it is holding positions in stock exchanges around the world.” While good investing means not being led by your emotions, Caldwell is clearly passionate about what stock markets have meant for the world.

“Having an effective stock exchange is the single best mechanism the world has ever come up with for developing a middle class,” he says. “It is a profoundly democratic institution that allows for the free expression of money. It allows for entrepreneurs with great ideas to match up with capital that wants to participate. And if you have a functioning stock market, you are able to mitigate any sort of resentment amongst people for wealth creation because they are able to participate.” That feeling of inclusiveness is vital for social cohesion and another reason why Caldwell favours India right now. “People talk about China, but India is a democracy with a free press and rule of law,” he says. “I have gone a couple of times over the last few years, and it is such a remarkable country that I believe will be the most interesting story of the 21st century.” With a population of 1.3 billion, India is the world’s sixth largest economy, but its progress in recent years hasn’t come easy. However, Caldwell says the current government has largely been successful with its reform agenda. “There are a number of structural issues in India – the amount of bureaucracy and red

tape – and corruption was one of the reasons that Prime Minister Modi was elected,” he says. “A populist and somewhat polarizing figure, he has actually delivered on his promises to deal with corruption. The Bombay stock exchange becoming a public company was only able to happen after a Modi victory.” Closer to home, Caldwell has been keeping a close eye on disruption in the tech space, which is impacting his Canadian and US strategies. Blockchain has become a real focus over the past year, which will continue for the foreseeable future. “One of our portfolio managers, Dr. James Thorne, has been talking about the Internet of Things and Internet of Value for well over a year now, which doesn’t seem like a long time, but in terms of blockchain investing, it is. It took about six months for anybody to recognize what he was talking about, and then in the fourth quarter of last year, everything took off.” Tech stocks have taken a hit over the past few months, but Caldwell believes this is a mere blip when it comes to the long-term prospects of the companies that can monetize blockchain technology in the coming decades. “It has had a bit of a pullback, but the underlying point is that over the next 20 years, we are going to see a complete change in how we make transactions,” he says. “I think it will touch everything. We have a significant investment in a property company called Real Matters ... many counties in the US still have all their records on microfiche.”

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4/05/2018 10:45:09 AM


LEADING PORTFOLIO MANAGERS likely to remain elevated near term, and the recent market sell-off has caused sentiment Client: Radius Financial Education and valuations to become less exuberant, global Contact:growth Tony Sanfelice earnings has turned strongly positive and appears highly synchronized.” Phone: 416.407.1445 In response, Conti reduced his weighting in Email: equities late last year – a temporary move until Publication: Wealth Professional the right opportunities present themselves. Ad“While Size: Full 8.25”tox favour 10.875”late-cycle we page continue sectors, on April technology File duewith date:emphasis Wednesday, 25, 2018and industrials,” he says, “stock selection and price Issue date: May discipline are now paramount, and will also Art Director: Vic Finucci drive geographical diversification. We remain Phone: (416) convinced that605-7729 the global economy is in the Email:

MAURICE CONTI Firm: Heward Investment Management Position: Portfolio manager Years in wealth management: 42 Years as a portfolio manager: 40

THERE AREN’T many PMs in Canada who can match Maurice Conti’s level of experience. With four decades as a PM behind him, Conti has observed markets rise and fall on countless occasions and has seen that this isn’t always dictated by fundamentals. “One of our frustrations centres on how markets – and individual stocks – can change direction so quickly,” he says. “Most of it starts with hedge funds or short-term traders both buying and selling. An example is how there were record numbers of shorts on oil, driving the price down in 2016 to a level which was not justified, and suddenly recovering as investors suddenly went long again.” That particular collapse was especially painful for Canada’s oil patch. It’s a characteristic of the investment industry that Conti doesn’t find particularly attractive. “While fundamentals justify some of the market moves, the extreme moves that we see today are magnified by these investors,” he says.


“Eventually these type of moves cause individual investors to panic, resulting in further price spikes, whereupon these pros actually reverse their trades. The little guy loses out.” Given the increased volatility in the markets, investing can be a risky proposition in 2018. That volatility is something Conti and his team foresaw at the end of last year, and they rebalanced their portfolios accordingly. “Global markets have entered a new era of volatility, and the first quarter of 2018 has seen a whirlwind of economic and political news and development,” he says. “Global trade frictions have increased, and together with rising US Treasury yields and mixed data flows, have somewhat shattered the complacency that coddled markets.” While those factors could persuade an investors to take a defensive position, Conti hasn’t wavered in his strategy. Corrections certainly aren’t new to him, which is why he is adopting a cautious but optimistic approach. “We reiterated to our clients in our year-end view that a market correction was imminent and would prove to be a temporary pause in an otherwise still positive – if late-cycle – global growth trajectory,” he says. “While volatility is

“Global trade frictions have increased, and together with rising US Treasury yields and mixed data flows, have somewhat shattered the complacency that coddled markets”

grip of synchronized growth, albeit decelerating, and markets will continue to do well.” Like many of the portfolio managers featured here, Conti believes those opportunities, when they arise, likely won’t be in the domestic market. “The Canadian market continues to be hurt by its large exposure to the energy sector,” he says. “Until we find a way to export more heavy oil and reduce the Western Canada Select differentials, the energy sector will be a bit of an anchor.” The always-volatile energy sector is one concern for Canadian investors, but it’s far from the only one. “NAFTA is a concern right now and will overhang the market until something is worked out,” Conti says. “President Trump talks a tough game, but recent developments, such as the exemption to tariffs on Canadian steel and aluminum and the appointment of pro-Canada/anti-tariff economic advisor Larry Kudlow, could play out well for Canada.”

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SHAWN BOOS Firm: Milestone Asset Management/ Canaccord Genuity Wealth Management Position: Portfolio manager Years in wealth management: 21 Years as a portfolio manager: 11 Certifications: CIM, CFP

LIKE MANY of the portfolio managers featured here, Shawn Boos doesn’t see increased volatility in the markets as a bad thing. Rather, like many discretionary managers, he sees opportunity. “The February correction in the markets didn’t change our strategy,” he says. “We used that as an opportunity to rebalance our portfolios up to full weight from slightly underweight equities. We are still positive on the intermediate and longer term, as our proprietary Milestone Recession Risk Composite is not flashing a warning of an upcoming recession, and the fundamental drivers of the current secular bull market remain in place.” Working alongside partner Steve Nielsen, Boos believes the market will present more reasonable valuations going into the next round of earnings, but he’s reluctant to put too much weight into domestic stocks. “The Canadian market overall continues


to underperform, and we have a neutral to slight underweight stance currently,” he says. “Our asset allocation strategy has always dictated holding a significant portion of risk assets in US and international equities, and we are full to slightly overweight on those allocations.” In gaining that exposure, Boos favours ETFs whenever they are appropriate. He believes there’s good reason for the investment vehicle’s growing popularity in Canada in recent years. “The rise in popularity of ETFs has been a positive for the Canadian investing landscape and positive for us as well,” he says. “We have incorporated ETFs in our portfolios for over 10 years, and as the popularity has increased, it has led to more investing options, both passive and active, more visibility in the public eye, and lower fees.” Active ETFs are becoming more commonplace in Canada, too, and that is reflected in Boos’ portfolios, particularly in the fixedincome segment. When it comes to the bond markets, he prefers to delegate to experts in that field. “Over the past few years, we have slowly moved towards managed ETFs and funds for a significant portion of our fixed income,” he says. “Continuing to hold low-yielding government and corporate bonds to maturity is not a strategy that has worked in this rising-rate environment, so we prefer to allow a third-party manager with a vast team that specializes only in credit to manage a portion of our fixed income.” Essential to this process is making clients fully aware of the service they’re receiving and what it costs. Only then can they evaluate what the true worth of discretionary management really is. “We have always been advocates for increased fee transparency and improved portfolio reporting to clients,” Boos says. “The industry has come a long way in both respects over the past decade, but we continue to be advocates for improvements in the future.” Portfolio management entails providing the investment expertise necessary to safeguard and grow a client’s assets. That might mean introducing a number of complex

“Over the past few years, we have slowly moved towards managed ETFs and funds for a significant portion of our fixed income. Continuing to hold low-yielding government and corporate bonds to maturity is not a strategy that has worked in this rising-rate environment” financial instruments, or, in Boos’ case, it might mean sticking with the products that have worked so well in the past. “There has been a lot of talk about the 60-40 model being outdated; however, we still consider fixed income to be an essential component of a properly balanced portfolio,” he says. “Having said that, we are active in terms of how much we allocate to fixed income, ranging from 25% to 40%, and within that allocation, we have adjusted the types of investments we hold. Additionally, we have followed aspects of the Yale Endowment’s asset allocation model for over 10 years, which includes alternative asset classes such as real assets and absolute returns to add diversification and improve the risk metrics of a portfolio.”

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VINCENT TONIETTO Firm: Fiduciary Trust Canada Position: Vice-president, portfolio manager Years in wealth management: 11 Years as a portfolio manager: 11 Certifications: CFA, CAIA, PRM

FOR PORTFOLIO managers, dips in the market are only an issue if you’re ill-prepared. Judicious asset allocation will typically protect a portfolio against volatility, as was the case earlier this year for Vincent Tonietto. With more than a decade of experience as a PM – first with Lombard Odier, then Industrial Alliance and MD Financial Management, and now Fiduciary Trust Canada – Tonietto has realized that market cycles mean downturns are an inevitability. “We usually make changes in our portfolio with regard to the long-term outlook of the markets as opposed to reacting to short-term events,” he says. “That said, we started the year having a defensive position in Canadian equities, to the benefit of fixed income. That served us well during the market turmoil in February.” Creating a strategy in fixed income is challenging right now, in light of the different signals emanating from central banks. The current rising-rate environment means Tonietto is emphasizing investment-grade corporate bonds and shorter-term maturities. He sees Canada in general as a risk currently, which is why he’s adopting a cautious approach. “While WTI crude oil prices have appreciated, Canadian crude oil prices are significantly lower due to ongoing supply bottlenecks into the United States,” Tonietto says. “In addition, an increasingly vulnerable housing market, high consumer debt levels and fears surrounding NAFTA negotiations remain risks for the Canadian economy in 2018.” Going underweight domestically leaves Tonietto room to manoeuvre within a portfolio, increasing global exposure wherever he can find value. After years in the doldrums, Europe has recently sparked back to life, which has attracted his attention. “We prefer international equities over

“We prefer international equities over Canadian equities, as they seem to present the best opportunities, particularly in Europe and emerging markets. Their economies continue to catch up with North America’s” Canadian equities, as they seem to present the best opportunities, particularly in Europe and emerging markets,” he says. “Their economies continue to catch up with North America’s. In Europe, financial conditions remain accommodating, and the region is experiencing strong economic growth. In emerging markets, attractive valuations and strong corporate earnings growth continue to attract capital away from developed markets.” Like many of the portfolio managers featured here, Tonietto sees emerging markets as an increasingly attractive segment. The potential returns put many North American companies in the shade, but the strategy isn’t without risk.

“We expect growth to be higher than in developed markets, but they will also be more volatile,” Tonietto says. “For instance, the ripple effects of the trade politics between the United States and China are worth monitoring.” Alternatives are another option for his high-net-worth clients seeking diversification, but, as Tonietto explains, certain asset classes fit certain investor profiles. “Alternatives are not a ‘one size fits all’ solution,” he says. “We offer customized solutions for our clients, which may include alternatives such as real estate, infrastructure or hedge funds – but ultimately, it depends on the client’s specific situation.”

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Investing for a new media reality BMO Global Asset Management’s Chris McHaney details the benefits of an ETF for thematic investing

LATER THIS year, S&P Dow Jones and MSCI will make significant changes to their industry classification system, which will include renaming the telecommunication services sector as communication services. Reflecting the new reality of media and communication today, the new classification will place tech giants such as Facebook, Netflix and Google alongside established telecom names like AT&T and Verizon. As a market leader in ETFs, BMO GAM’s latest offering, BMO Global Communications Index ETF (COMM), will provide investors with exposure to this hybrid space. Managing the fund is Chris McHaney, director and portfolio manager with BMO GAM, who explains the origins of the product. “Over the last five to 10 years, the way people consume media has really changed,” he says. “That has caused a disconnect between certain companies and the way they are classified. In Canada, we have Shaw Communications, which is classified as consumer discretionary, but then you have Rogers or BCE classified as telecommunications. Over time, we can see that these companies are all in the same business.” Then there are the Apples and Facebooks of this world, which are clearly huge players in the media landscape in 2018. Bell and Rogers might not have seen these companies


as competition 10 years ago, but that’s no longer the case today. “Companies that traditionally have been thought of as IT or technology are moving into the media and communications space,” McHaney says. “This [COMM] strategy is trying to represent this new paradigm, and will include traditional media companies, but also those newer to the label of media. Going forward, all of these companies will have a hand in what we consume in media and how we consume it.” Using the Solactive Media & Communications Index as its benchmark, COMM will include holdings from across the communications spectrum. That includes some of the best-performing stocks out there today (Alphabet, Apple, Netflix), as well as companies with long track records of performance (Rogers, BCE, Disney). Of the underlying stocks, Apple and Facebook constitute the largest weighting, but diversification is a central tenet of the fund’s investment strategy. “What we have done with our construction and weighting methodology is what we do with most of our ETFs – we are thoughtful of the way companies are weighted,” McHaney says. “There is no undue weight into any one stock, and that helps with stock-specific risk.”

In terms of the fund’s geographical mix, it’s not surprising to find the US making up the lion’s share with weighting of more than 60% – it is home to Silicon Valley, after all. Japan is next on the list for representation – and for good reason. “It is one of the larger developed economies outside of the US, and they have some larger incumbent companies in the telecom space,” McHaney says. “Back in the late ’90s and early 2000s, everyone thought of Japan as being at the forefront of mobile phone technology. Three of the larger companies there – SoftBank, NTT, KDDI – were really involved in that growth back then and have grown to be very large companies globally.” COMM provides investors easy access to this broadened landscape through the industry reclassification, and McHaney believes ETFs are the perfect vehicle for thematic investing in general. BMO has led

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“Companies that traditionally have been thought of as IT or technology are moving into the media and communications space. This strategy is trying to represent that new paradigm ... Going forward, all of those companies will have a hand in what we consume in media and how we consume it” Chris McHaney, BMO GAM the way in inflows in the space for years now, and its sector-based funds have been central to that success. “Thematic exposure is very specific, and generally an investor is in there for a certain reason,” McHaney says. “That reason might

not always persist over time; you might like communications today, but two years from now you might not want that same exposure. An ETF provides a very efficient and liquid way for an investor to get exposure on a diversified basis, so they can easily get in and

out when they want to.” An ETF also allows Canadian investors a chance to gain geographical exposure to stocks they might not be able to access otherwise. The financial and resource sectors dominate here in Canada, and McHaney doesn’t see that disparity changing anytime soon. For that reason, he advises those seeking diversification for their portfolio to consider ETF alternatives. “We have a pretty good artificial intelligence community in Southern Ontario,” he says. “That might one day be a really strong growth area, but that is still a ways off. Part of the reason we launch these global funds is that we cover areas that don’t have strong representation in Canada. It is being able to balance out a typical Canadian portfolio.” And for those wanting to gain exposure to the media companies of the future alongside the traditional names in the space, COMM ticks all those boxes. “It’s not something that is huge in a typical Canadian’s portfolio exposure,” McHaney says. “They can add a growth element in an area that doesn’t have a lot of representation in Canadian equities. They can do that very easily through an ETF at a low cost. It is a longer-term building block that should have several years to grow as this new area propels how we consume media.”

The viewpoints expressed by the portfolio manager represent their assessment of the markets at the time of publication. Those views are subject to change without notice as markets change over time. Any statement that necessarily depends on future events may be a forward-looking statement. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. Although such statements are based on assumptions that are believed to be reasonable, there can be no assurance that actual results will not differ materially from expectations. Investors are cautioned not to rely unduly on any forward-looking statements. In connection with any forward-looking statements, investors should carefully consider the areas of risk described in the most recent simplified prospectus. This article is for information purposes. The information contained herein is not, and should not be construed as, investment advice to any party. Investments should be evaluated relative to the individual’s investment objectives and professional advice should be obtained with respect to any circumstance. BMO Global Asset Management is a brand name that comprises BMO Asset Management Inc., BMO Investments Inc., BMO Asset Management Corp. and BMO’s specialized investment management firms. BMO ETFs are managed and administered by BMO Asset Management Inc., an investment fund manager and portfolio manager and separate legal entity from Bank of Montreal. Commissions, trailing commissions, management fees and expenses may be associated with mutual fund investments. Please read the fund facts or prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. “BMO (M-bar roundel symbol)” is a registered trademark of Bank of Montreal, used under licence.

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4/05/2018 10:48:12 AM



Emerging markets at home New research shows women and millennials will be key growth drivers for wealth management in Canada IN ITS recent paper, “Cultivating Relationships in Emerging Markets,” Echelon Wealth Partners analyzed how the advisory business will evolve in the coming decades. In this case, ‘emerging markets’ doesn’t mean burgeoning superpowers like China or India, but sections of the Canadian market that are underserved right now. According to


Echelon’s research, 53% of women in Canada don’t use the services of advisor, and that number increases to 75% for women under the age of 40. This is despite the fact that women control approximately one-third of global assets, or $39 trillion. Millennials are another segment the wealth management industry has neglected, which is

why firms like Echelon are now making this demographic a priority. The global net worth of millennials is forecast to reach $24 trillion by 2020 as the world’s wealth is passed down through inheritance. That generational shift is now gathering momentum, and advisory firms with long-term ambitions need to position their business accordingly.

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a lot of power, but sometimes they don’t get that level of respect from this industry.” Echelon’s paper revealed that the average female client’s net worth is $1.1 million, but 73% are unhappy with the service they get in financial services. In wealth management specifically, 80% of women switch advisors after the death of a husband, which certainly doesn’t paint the profession in a good light. The advisory industry in Canada is 80% to 85% male, which might explain that massive drop-off when a spouse passes away. Kanji is part of the female contingent of financial advisors in this country, and in her opinion, while their numbers may be small, their influence is huge. “Looking at the number of advisors who

For Harrison Keenan, a portfolio manager and senior vice-president at Echelon, millennials are a growing part of his business. As a 20-year Bay Street veteran, Keenan has observed some key generational differences. “The baby boomers generally feel more comfortable investing in the stock market,” he says. “Younger people don’t mind investing in Google or Amazon, but they saw what happened in 2008, and it has made them a little reluctant to invest in stocks.” He has also identified certain common traits in his female and male clients when it comes to financial planning and investment. “They both run the spectrum, but it’s a generalization that women are a lot more cautious and also more patient,” he says.

“I have always maintained that a woman’s attitude will influence the entire household’s economics. As such, women hold a lot of power, but sometimes they don’t get that level of respect from this industry” At Echelon, millennials represent 8% of total accounts, and the firm wants to increase that number to 28% by 2019. Likewise, women represent 20% of Echelon’s current business, and management has set a target of 38% by 2019. To achieve that goal, Echelon will need the kind of advisors female and millennial clients can relate to. Yasmin Kanji is a senior vice-president and investment and insurance advisor with the firm, and in her opinion, there’s a lot of room for improvement in the wealth management space when it comes to reaching these demographics. “I don’t think women have a categorically different outlook toward financial planning, but I do think they sometimes fall into the trap of being approached from that assumption,” she says. “I have always maintained that a woman’s attitude will influence the entire household’s economics. As such, women hold

Yasmin Kanji, Echelon Wealth Partners are female is one way of measuring representation,” Kanji says. “However, it is clear to me that the support roles of the industry showcase many females. Women run practices, take care of clients, manage process and drive strategy. As associates, assistants and in head offices, I see women truly shaping this industry.” Gender disparity isn’t the only issue for wealth management – there’s also a real shortage of young advisors. It’s a tough business to earn your stripes in, which has led to a greying industry that is struggling to attract new talent. The problem is exacerbated by the fact that digital capability is becoming a vital compo­ nent of every advisor’s practice. Fifty-seven per cent of millennials told Echelon they would change advisors if they didn’t have sophisticated technology and online platforms.

“Given their risk tolerance, women are also a little more fearful when things go wrong.” It’s also much more likely for female clients to give a referral when they are satisfied with the service. Echelon’s research shows that a female client will refer 16 people over the period of a successful relationship, compared to three for men. In order to achieve those referrals, understanding the differences between clients and their goals is key, Keenan says. “Whether it’s a market-neutral hedge fund or a mix of hard assets and a balanced approach to stocks, bonds and real estate, I find a lot more women would favour that,” he says. “Returns of 4% to 7%, but without the downside, or you can have a much more volatile portfolio where you end up with an 8% to 10% return over time, but you could also be down as much as 20% to 30% in a bad year.”

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4/05/2018 10:50:19 AM



Breaking the mould Ghinel Bozek discusses the importance of understanding what makes your clients tick

MINING IS big business in Canada: In 2016, the industry recorded $40.8 billion in production and employed 403,000 people. Although mining is noted for its high levels of volatility, the sector remains a considerable wealth generator in this country. Ghinel Bozek specializes in managing some of that wealth. Part of Alexandra Horwood & Partners at Richardson GMP and a 2016 WPC Young Gun, Bozek counts among her clients some of Canada’s top mining executives and entrepreneurs. Since it was founded in 2014, Alexandra Horwood & Partners has made the extraction sector a priority, and that focus has served it well. An important part of being a successful financial advisor is understanding your client’s circumstances, Bozek explains, so the firm has put a priority on developing its knowledge of this industry. “We have a booth at PDAC [the Prospectors & Developers Association of Canada] every year,” she says. “This business is all about understanding the needs of your client, and it is at PDAC where we developed an incredible niche. By asking the right questions, we learned that the needs of successful mining executives and business owners were aligned and in need of a higher level of planning.” Mining – whether it’s for gold, potash or uranium – is volatile by nature, so it’s essential for those who make their living that way to have the right counsel. A sudden drop in


the price of gold shouldn’t massively impact a financial plan designed for the long term, Bozek explains. “Every financial plan we create is catered to the individual needs of our clients and designed specifically to mitigate the fluctuations in the market,” she says. “Our clients are resilient in their chosen careers, and we demand the same resilience from our investment portfolios.” The equity markets have struggled at different points so far this year, but that doesn’t overly concern Bozek. While some investors might have forgotten what volatility looks like, she says the markets are simply reverting to historical norms. “Market volatility is the new norm, and you shouldn’t be afraid of it,” she says. “History shows us that difficult markets laid the ground for new highs and growth in the market – you just need to work with the right professional to navigate through these changing times while minimizing risk.”

Currently in the process of earning her CIM designation to become a portfolio manager, Bozek came to wealth management after first working in broadcast journalism. She was drawn to Richardson GMP, thinking the inner workings of the company would make an interesting story, but after closer inspection, decided to join the firm herself. Working under the tutelage of John and Rebecca Horwood, Bozek was able to learn the mechanics of wealth management from two of Richardson GMP’s most esteemed financial planners. “My insatiable hunger for uncovering stories in journalism translated well to becoming a wealth manager,” Bozek says. “The same due diligence is required when vetting investments as vetting stories and sources. I still find myself digging for the truth to find the best strategies for my clients daily. I was fortunate to find mentors who recognized that skill set and taught me the very important foundations of becoming

THE FEMALE PERSPECTIVE While Canada is something of an international laggard on female representation in the boardroom, financial services is one of the more progressive sectors. Bozek believes greater diversity in wealth management will clearly benefit the overall industry. “Female leaders in our industry are breaking the mould by bringing a different voice to the table,” she says. “[By] having compassion and listening to the true needs of the client, [we are] developing a natural enhancement to what wealth management is, and you see more and more women entering the industry every day.”

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“You can’t succeed in this industry if you don’t love what you do. You have to have the passion and hunger to really change people’s lives”

$100,000 Average annual pay for a mining worker in 2016, which was higher than the forestry, manufacturing, finance and construction sectors

$57.6 billion Amount mining contributed to Canada’s GDP in 2016

1 Canada’s rank in potash production; it’s also second in uranium and niobium, putting it in the top five countries in the global production of 13 major minerals and metals

57% Percentage of the world’s public mining companies listed on the TSX and TSX Venture exchanges

a great financial advisor. For that, I am truly grateful.” This is a business that can be unforgiving of new advisors, but that isn’t the case on The Horwood Team, which emphasizes mentorship. Those early days provided plenty of lessons for Bozek, but one in particular has stayed with her throughout her career.

“You can’t succeed in this industry if you don’t love what you do,” she says. “You have to have the passion and hunger to really change people’s lives. That’s what real wealth management is – it’s not just about investments; it’s about making a positive impact that will last generations for your clients and their families.”

40% Proportion of the equity capital raised globally for mining in 2016 accounted for on the TSX and TSX Venture Source: The Mining Association of Canada

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Reverting to type Forstrong Global president and CIO Tyler Mordy outlines what increased market volatility could mean for investors

THE GROWTH of exchange-traded funds over the past decade has been one of the biggest investment stories of the postfinancial crisis era. Global ETF assets now stand at US$4.7 trillion, and Canada accounts for $151 billion of that total. Investors here were slow to embrace ETFs at first, but that’s no longer the case, and the market has seen an abundance new products from a host of different providers in recent years. The majority of Canada’s main asset managers now have a presence in the ETF space because that’s what consumers expect of them. Since its foundation in 2001, Forstrong Global Asset Management has made ETFs the backbone of its business. When the company was founded, ETFs were a niche part of the Canadian market, but that certainly isn’t the case today. Tyler Mordy, president and CIO of Forstrong Global, explains how his firm’s approach has proven advantageous over the years. “We realized quickly that ETFs would change the nature of the portfolio management industry and the architecture of decision-making processes,” he says. “ETFs have colonized the world’s asset classes, so the


toolset for money managers is much larger and more sophisticated.” As the ETF market has evolved, so too has the role of financial advisors and portfolio managers. There are higher expectations for the profession these days, which is central to Forstrong Global’s business proposition. “It has empowered portfolio managers to make global decisions, rather than relying solely on traditional stock selection to add value,” Mordy says. “Instead of classic bottom-up stock picking, we can now effectively pick asset classes around the world for outperformance and risk management.” Operating globally balanced portfolios is one of Forstrong’s major selling points. Global exposure should be a priority for investors, Mordy believes, but for a long time that wasn’t the case. “The research is conclusive – Canadian investors have a strong home bias,” he says. “The issue with Canada’s stock market is that it is over-concentrated with banks and energy. The fact that the majority of Canadian investors have an almost exclusively Canadian portfolio is giving up the ‘free lunch’ of finance, which is diversification.” The rise of the internet has led to a height-

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ened awareness of what’s going on around the world, and that’s pushing investors toward global diversification. Canada makes up a small percentage of worldwide assets, and as markets become more interconnected, international developments have much more of an impact here. Forstrong’s global macro investment philosophy is designed to address that, and as markets begin to experience more volatility, active management will really start to prove its worth. “After a lengthy sabbatical, volatility has returned to the world financial markets,” Mordy says. “This is normal; what isn’t normal are years like 2017 where the US

believes sentiment has somewhat normalized over the past year. “What we see now is what Keynes artfully referred to as ‘animal spirits returning,’” he says. “It’s remarkable that it took 10 years to get that way, but it is a feature of a postfinancial crisis period. You look back at the history of financial crises, and one of the common properties is that consumers and corporations take a long time to up their risk-taking.” Looking at the investment horizon, Mordy is largely positive, although there are some factors that could potentially hinder prosperity. “Trade wars and shifting super trends make the world a more risky place,” he says.

“Trade wars and shifting super trends make the world a more risky place. But economic growth is unlikely to weaken in the year ahead, given the massive US fiscal stimulus and a steady retreat from austerity in Europe” Tyler Mordy, Forstrong Global Asset Management stock market’s maximum peak-to-trough decline was just 3%.” By contrast, this year has reverted to more historical norms, with a number of dips so far already. Increased volatility isn’t necessarily a negative, however, and offers portfolio managers a chance to find good investments. “Our firm tracks several factors called super trends,” Mordy says. “It’s a three- to five-year outlook of the big macro trends impacting financial markets. We now have several super trends shifting – US household incomes are finally rising, and importantly, fiscal stimulus levers have been engaged.” In Mordy’s view, the prolonged hangover from the financial crisis caused investors to be overly risk-averse. While headwinds remain both in Canada and globally, he

“But economic growth is unlikely to weaken in the year ahead, given massive US fiscal stimulus and a steady retreat from austerity in Europe.” Europe’s emergence from a decade-long slump means Forstrong is currently overweight on the continent. In Mordy’s view, regions outside of North America have massive potential for growth. “The biggest investment opportunity right now is the narrowing of the performance gap that has opened up between America and the rest of the world in the post-crisis period,” he says. “The rest of the world has been a little late to the recovery party, but broad fundamentals remain excellent in most emerging markets, notably in Asia, and are primed for multi-year outperformance.”

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How to build a network that drives your success Assembling everyone from your pit crew to your butt-kickers involves much more than cocktails and canapés, writes speaker and author Janine Garner HOW MANY times have you been told that networking is “essential for your growth and personal success”? And yet when it comes to networking, many of us are overwhelmed by the pressure of where to start, confused by what appears to be an overcomplicated world of opportunities to connect online and offline, and overstretched by the demands on our time. The truth is, the adage “It’s not what you know; it’s who you know” has significantly more weight in this 21st-century world of busyness, in which jobs are filled before they are advertised, previously un-thought-of collaborations appear out of nowhere to create new and competitive markets, forming referral relationships is increasingly hard to do yet is critical to business growth, and everyone seems to be friends with everyone else on social media. A Harvard Business Review article entitled “Managing Yourself: A Smarter Way to Network” found that “the executives who consistently rank in the top 20% of their companies in both performance and wellbeing have diverse but select networks … made up of high-quality relationships with people who come from several different spheres and from up and down the corporate hierarchy.” So, the questions to ask are:


Who is in your network? How much input or influence do they really have on what you’re doing or trying to achieve? How much do they truly know you and your goals? How much can they help you? Effective networking has to be about the genuine – about the interplay of a select group of people who are working closely together, strategically creating plans to succeed. Here are three key tips to building a network that works:

Identify your critical few British anthropologist Robin Dunbar posited that there is a limit to the number of relationships humans can comfortably maintain – 150, to be precise. He suggested this is the number we can manage to maintain stable relationships with – remembering each other’s names, keeping in contact and doing each other favours. Anything more than this, he said, would result in the creation of other subgroups and tribes. Momentum starts with a significantly smaller circle of influence that you are securely

in the centre of, rather than being mixed in somewhere with all the other participants. A small group of people providing quality thinking and behaviours will push you further than you could ever go alone. An effective network bridges a smaller number of more diverse individuals with differing levels of expertise and varying ages, genders and experience. Such networks are cross-functional, cross-hierarchical and cross-industry, delivering balance and diverse thinking. Identify the quality of people you surround yourself with, not the quantity. So, who are the right people to have in your network? Find your personal cheer squad – your promoters. According to research from the Center for Talent Innovation, people with promoters are 23% more likely to move up in their careers than those without sponsors. Your own personal cheerleading squad is key to your success. They are by your side through thick and thin, never giving up on you, always dreaming big with you. Get your support team in place – your pit crew. Your pit crew can make or break a race. They add stamina to help you run the

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Successful networking is about under­ standing the connections you should be making, as opposed to those you are making. It’s about asking who you need to surround yourself with to inspire you and help you grow. It’s about being brave enough to seek out and connect with new individuals.

Exchange value

marathon of your dreams, navigate complexities and recover from setbacks. They help you learn from mistakes and keep pushing you on anyway. They celebrate your wins, remind you of your achievements and keep it real. There’s no doubt that climbing the ladder of success can be a lonely task that requires grit, determination and perseverance. Having the right crew to help you overcome any difficulties and challenges, and keep you mentally tough and balanced, is essential. Discover people who make you better every day – your teachers. Harvard professor Linda Hill says, “You can’t think of something new unless you are being pushed to think in new directions, and you can’t do that unless you are engaging with people who have a different viewpoint.” A life of continuous learning is essential to growth. The right teachers teach you mastery, guide and stretch your thinking, challenge your ideas, and encourage you to keep learning, because they know that this constant curiosity creates real opportunity for growth, achievement and success.

Have some accountability buddies – your butt-kickers. Linda Galindo, author of The 85% Solution: How Personal Accountability Guarantees Success, believes butt-kickers are our secret weapon for success. “Working with a partner prevents the ready-fire-aim approach that a lot of entrepreneurs use,” she says. Love them or hate them, we all need buttkickers – those individuals who help accelerate the journey, pushing you to do more and holding you accountable for your actions. Butt-kickers listen to your dreams and accelerate your goals by making sure you stick to them. They hold you accountable for your actions and decisions and ensure you do what you say you’re going to do – and then some.

Find ways to constantly add value. Ask yourself if you're doing enough with and for your connections. Consider what more you could do to add value to them and their businesses. Model the behaviour you seek in return. Give knowledge unconditionally, open doors willingly, and share insight to drive continued growth and success for others in order to attract them and engage with them. Richard Branson famously said that “nobody can be successful alone,” and in our fast-moving business world, we all need a network that works for us. Take a long, hard look at your network and ask yourself: Who really matters? Who is teaching you mastery and knowledge? Who is the key influencer pushing you to be and do more, holding you accountable to your dreams? Who is promoting you, acting as your personal cheer squad, inspiring you to become more? Who is keeping you balanced and aligned, caring and connecting you with others? Choose your network wisely. Build a circle around you that allows you to transform and become so much more.

Be brave and diversify Step out of your comfort zone, strategically expand your circle of influence, diversify your connections, and explore other people, businesses and experiences. Consciously consider who else you need to learn from, add value to, engage and collaborate with.

Janine Garner is an internationally acclaimed Fortune 500 mentor, keynote speaker and author of It’s Who You Know: How a Network of 12 Key People Can Fasttrack Your Success.

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Know what you’re worth If you’re using a fee-based model, value pricing provides a simple way to justify your costs to clients and yourself, writes lawyer Jeremy Streten

HAVE YOU ever had a client who was shocked at how much time you spent on their portfolio? Have you ever felt that dread when you had to send your client a statement, knowing that you would have to discuss each and every thing you did? Have you ever thought that there must be a better way? For professional knowledge workers like accountants, lawyers, financial planners and other consultants, charging clients based on the time spent doing that work is oldfashioned and needs to be revisited. Building lifelong relationships In any business, it is cheaper to keep an existing client than to find a new one, so your goal needs to be to build lifelong relationships with your clients. Doing this is not easy; building any long-lasting relationship requires sacrifices to be made on both sides to build trust and confidence. I have seen this trust damaged or destroyed time and time again when a timesheet is attached to a bill. It is human nature to underestimate how much time it will take to complete a task. Value pricing gets around this problem by providing a set fee for the work that was


performed, so there is no need or ability to question how much time you spend on your work.

The inefficiencies of charging for time The concept of charging for knowledge work based on the time a person spends doing the work is inefficient for a couple of reasons: We all have the same amount of time in the day to do our work. Time billing places an upper limit on the amount you can charge in a day. As you become more experienced in your chosen profession, you will find that you are able to do your work faster. For instance, a new lawyer might take a day to draft their first business sale contract, but by the time they are at their fourth attempt, they can do the work in an hour. As you become more efficient, the amount you can bill for time actually decreases. You may be thinking, “Well, the solution to both of these problems is to just increase my hourly rate.” If you do that, you will likely find that your clients do not see the

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increased efficiency and will question the increased rate.

You need to be smart Clients want to know what they are getting for their money. When knowledge-based workers are charging for time, they will often expect their clients to trust them and will provide an estimate for their work. Then the matter becomes more complicated, and all of a sudden the client is left with a bill that is sometimes 40% or 50% more than they expected. Rather than estimating a price based on how long the work will take to do, knowledge-based workers need to look at the value the client will be receiving and set a price accordingly. Value pricing forces knowledge workers to become better advisors to their clients. It forces them to define what work they will actually be doing and put a price on the work.

Who will benefit from value pricing? The advantages of value pricing for clients are there to be seen, but it is knowledge workers who will truly benefit. All professionals who currently charge for time will benefit from a change to value pricing, as they will be better able to do their work and keep their clients satisfied, while avoiding arguments over the time they spent doing that work. I know from experience that shifting from time-based pricing to value pricing is difficult for knowledge-based workers, but your clients will appreciate it, and it will leave you to do your work.

Jeremy Streten is a lawyer and author of the Amazon bestseller The Business Legal Lifecycle, which helps business owners understand what they are doing in their business from a legal perspective and gives them a plan for the future.

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4/05/2018 10:57:16 AM



Command and control Business strategist Matt Malouf talks through the reports and feedback you need to keep your business running at full speed

REPORTING AND accountability are essential for you to understand what is going on in your business and ensure that tasks are getting done at the correct time and to the standard you expect. Regardless of the size of your business, having your team report to you regularly will be a great measure of their productivity and will inevitably improve yours. Now, don’t stress and think that the reporting I’m talking about is going to be more work. In fact, reporting will be a vehicle that will allow you to: Motivate your team members to make regular, measurable progress Answer any questions or be clear on where your team needs your assistance Invite your team to provide suggestions and give feedback on what is working and not working Without an effective reporting process in place, it is quite challenging to understand if your team is doing a good job and moving in the right direction. This then leads to many unnecessary conversations and emails so you can understand what is going on. This takes a lot of time and can be quite frustrating. You may feel out of control and uneasy instead of feeling in control and clear about what is going on in your business each day.


A good reporting rhythm is essential. I recommend three key reports – daily, weekly and monthly – to provide clarity about what each person is doing and responsible for, along with the confidence that these tasks are

getting done when you need them to be done.

Daily reports The daily report is designed to give you an understanding of what your team member has

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achieved during that day. The report answers three questions: 1 What did you accomplish today? 2 Did you achieve everything that was

scheduled to be completed today? (If no, please list what wasn’t completed and why it wasn’t completed.) 3 Is there anything you need help with, or

do you have any questions? These questions are designed to keep your people focused on the specific tasks that have been assigned to them, and to also ensure that they are performing their assigned tasks in a timely fashion. They also allow for open dialogue on a daily basis to ensure that tasks and projects are moving forward and aren’t delayed because of you.

Weekly reports The weekly report is designed to be a summary of the week’s activities. Each person needs to report on the success or failure of achieving their key responsibilities and report to you their weekly KPIs. This report will also include answers to the following questions: 1 What was your brightest moment of

the week? 2 What was your biggest challenge of

the week? 3 What did you learn in the last week? 4 Based on the week gone by, I believe we

should stop doing … 5 Based on the week gone by, I believe we

should start doing … 6 I need your help with …

This report will form a good part of the agenda for the weekly meeting you have with your team. The report is designed to allow you to gauge how each person is feeling throughout their workweek, in addition to giving you valuable feedback and ideas on how to continue to grow and develop your business.

Monthly reports The monthly report is designed to be a mini 360-degree assessment of each employee’s performance. The team member will list each task that has been assigned to them, the frequency of the task and the importance of the task. They will then list the date they were trained in the task and who trained them. The person completing the report will then give themselves a score out of 10 on their ability to complete the task with 100% confidence and trust. This report will then be submitted to the team member’s direct manager (this might be you or somebody else) for them to assess. Once the assessment is complete, a meeting should occur to discuss the assessment score variances and how these will be rectified. This will often involve retraining or further system development.

Accountability Accountability often gets confused with someone taking the blame for something. This is not what we’re talking about here. Accountability is, in my opinion, about delivering on a commitment. It’s being answerable or responsible to someone for something. It is essential to your ability to stop doing the tasks on your list that can be delegated to someone else, who then becomes accountable for the task or activity. In order to achieve this, it is essential to implement the following five steps: 1 Set clear expectations. Your people can only be accountable if they understand what is expected of them. Hence, it is important to be clear about the outcome you desire, the timeframe in which you require this to be completed and whether you require them to follow a specific system to achieve the outcome or if they can choose their own adventure. 2 Arm them with the tools of success. Make sure your people are trained and have all the tools they require to achieve the

desired outcome; otherwise, you are setting them up to fail. 3 Create a simple scoreboard of performance. While you might discuss the specific outcome you desire, it is important to establish some milestone check-ins and progress reports to enable you and the person performing the task or project to clearly understand whether they are ‘winning.’ 4 Conduct constructive feedback sessions. Open, honest and constructive feedback is essential to ensure your people understand how they are performing. This is made easier by implementing the first three steps. This will require some tough conversations at times, but remember, the only way for your people to get better is for them to understand what they need to improve. 5 Establish clear rewards and consequences. Most accountability is ineffective because there are no clear rewards or consequences for following through on what you said you were going to do. If a person has succeeded, then they should be rewarded in some way. This could be as simple as acknowledging their achievement – or, if they prove themselves over time, it could lead to a promotion. If they have not followed through and delivered on their commitment and you feel confident you have set them up to succeed, then you might need to consider assigning the task or activity to someone else or perhaps even moving the person on. While this might seem simple to follow and execute, this five-step process is often neglected. Take the time to understand and implement this, and you will be amazed at how quickly you see a positive return.

Matt Malouf is a business strategist. This article is an edited excerpt from his book The Stop Doing List, which draws on his work in helping business owners free up time to build their businesses.

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4/05/2018 10:58:43 AM



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His path has had some detours, but Rob McClelland has never been one to let a roadblock hold him back McClelland’s entrepreneurial streak emerged early – at age 6, he started a for-profit library, charging his family a penny to rent out books already in the house. Later, he diversified his lemonade stand to include fries; in preparation for this expansion, 10-year-old McClelland rode his bike to the grocery store, where he negotiated a bulk rate on supplies





ENCOUNTERS ‘YEAH-BUT’ SYNDROME McClelland joined the Hudson Bay Company trainee management program during a time of considerable upheaval and came face-to-face with what he calls ‘yeah-but syndrome’ “It was a tough company to work for: getting [workers] motivated and getting them to change. I was in line [to manage] a store, but I took a package to leave. There would have been a cap on what I could make, but no cap on how hard I had to work”


GETS OFF THE GROUND A chat with his brother-in-law inspired McClelland to join Equion, which later became Assante. His typical workday was 18 hours long; time in the office was followed by nights spent bartending. Adding evening seminars for prospective clients made the load heavier, but brought success

“My seminars on retirement planning would draw 25 to 30 attendees; 15 to 20 would become clients. [Getting established] is like getting a plane off the ground – at first you have to work crazy hard; then it’s much easier” 2004 STRIKES OUT ON HIS OWN After 10 years managing a branch and struggling to change his advisors’ ways, McClelland decided to go out on his own “We tried our best to train the other advisors in the branch, but they were comfortable; they didn’t want to change their businesses. That’s true of a lot of financial advisors. That convinced me that I wanted to open my own branch and choose my own advisors. I’ve picked my own people and have 100% confidence in them”


BARELY MAKES THE CUT Feeling destined for a career in business, McClelland chose to study business administration at the University of Western Ontario, where entry to the esteemed Richard Ivey School of Business is based on performance in students’ first two years of university. McClelland – who admits his marks were not all they could have been – was the 148th student admitted out of 150, but he ultimately graduated in the top 25% of his class “Getting in was prestigious; the rest was up to you”


FINDS FINANCIAL PLANNING With six months’ pay in hand and driven by a desire to start his own business, McClelland spent his days fashioning a business plan, scouting locations and sourcing suppliers for The Men’s Room, his planned men’s accessories store. But when a massive recession derailed construction of the location and his partner backed out, McClelland found himself pursuing a career in financial planning “It was a godsend”


BECOMES A VP Thanks to his production levels, McClelland was named vice-president at Assante. He credits the company’s then-president with much of his success “Michael Nairne taught the values of managed money, a balanced portfolio and financial planning for clients. That was such a good foundation. I still practice those principles today. He used to say, ‘Think of [the industry] as a wave – see which way the wave is going, get on top and ride it. That visual has always stuck with me”

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Connon says performing has polished his public speaking skills: “If you’re OK singing on stage, you’re OK talking on stage”


Number of guitars Connon owns (plus two mandolins and four basses)


The most Connon has ever spent on a musical instrument


Size of Connon’s largest audience (his smallest was five)

TAKING CENTRE STAGE When he’s not advising investors, Michael Connon is most likely rocking out IT WAS the guitar bought for him by his older brother, a professional musician, that inspired Michael Connon to learn to play when he was a teenager. Within a couple of years, he was playing in bands “at really scummy bars.” These days, the gigs have become more infrequent for the Toronto-based financial advisor – he


usually plays once a month with the trio Clayton, Connon and Skarjak – but the thrill is the same. “It’s a great rush to be onstage,” Connon says. “I like entertaining people; I love to watch people dance and sing along. The feedback is instant – within 10 seconds, you see the result. It’s a nice change. At

work I do a lot of long-term planning; gigging is an instant rush.” Connon also revels in the freedom that guitar-playing offers. “When you play music, you can’t think of anything else – it takes too much concentration,” he says. “So whatever stress you have disappears. It’s a real getaway from what I do all day.”

f in

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2018-04-27 4:06 PM 4/05/2018 10:03:34 AM

Wealth Professional 6.05  

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