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ISSUE 3.10

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CONTENTS

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UPFRONT 04 Editorial

Communicate your value to stay ahead of the new commissions curve

22

INDUSTRY ICON

ROBERT ROBY

26 COVER STORY

THE ADVISOR LIFESYTLE

This advisor’s client relationships transcend the norm, very humanly

Immigrants represent a potentially lucrative market for advisors

10 News analysis

Bank implementation of robo-advisors is raising red flags with human ones

12 Intelligence

Harmonizing offering memoranda creates provincial discord

36

PEOPLE

ECONOMIC OUTLOOK

Three key portfolio managers look back at 2015 and ahead to 2016

16 ETF update

The industry’s face leaves the firm he helped found ready for the future

20 Opinion

Why you need to start working on your succession plan today

PEOPLE 46 Career path

Ryan Colwell has combined his passion for financial services with a dedication to doing good for the world

Single mom, financial planner, entrepreneur – Julia Chung beat odds

48 Other life

Advisor Lewis Chan helps prison inmates plan for life after doing time

42

FEATURES

TALKING UP PHILANTHROPY There are tangible benefits to getting clients thinking about charitable giving

2 www.wealthprofessional.ca

08 Statistics

14 Alternative investment update

FEATURES

40

How hard will it be to implement the final stage of CRM2?

A leading Canadian mutual fund company leaps into the ETF market

The second-annual Wealth Professional Lifestyle Survey shows advisors are starting to find a better work-life balance

PRODUCER PROFILE

06 Head to head

WEALTHPROFESSIONAL.CA CHECK IT OUT ONLINE

40

40

40

UPFRONT

EDITORIAL

Making the move

W

ith the full implementation of CRM2 less than 12 months away, the growing speculation is embedded commissions soon could be on the chopping block. The Brondesbury and Cummings reports – both commissioned by the Canadian Securities Administrators – support the hypothesis that trailer fees influence the investments recommended by advisors.

“The Brondesbury study is just the tip of the iceberg,” John DeGoey, a feebased portfolio manager at Burgeonvest Bick, told Wealth Professional in June upon release of the Brondesbury Report. “Cummings will provide the smoking gun that embedded-compensation advisors are biased beyond all reasonable doubt.”

After publication of the Cummings Report in late October, “the people who are proponents of trailing commissions [will] have to explain that their insistence that there is no impact is squared with the finding of this study,

Communicating your value and transitioning to the fee-based model could help you stay ahead of the curve because it clearly does have an impact,” De Goey said. “The study just verifies what [fee-based advisors] already know, but the people who insist it wasn’t so have to explain. I think it will be the final nail in the coffin, but it will be another eight months before we know for sure.”

De Goey clearly has a dog in this fight, but should embedded-commission advisors start making plans to move some clients to the fee-based accounts regulators seem more comfortable with? Those who have made the switch say it’s not easy but always worth it, citing the smoother income stream and potentially higher valuation of a practice provided by the fee-based model.

“The future is about value, costs and transparency. A fee-based model has the ability to enhance transparency and to better align interests,” reads a 2014 fee-based transitioning brochure published by Dynamic Funds. “Effectively communicating your value and transitioning to the fee-based model can help you stay ahead of the curve.”

Now you just need to take that leap...or not.

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UPFRONT

HEAD TO HEAD

How hard will the final stage of CRM2 be to implement?

The final stages of CRM2 – scheduled to be fully implemented by mid-July 2016 – could present a challenge for some advisors

Marta Stiteler Owner/financial planner Pillar Retirement Group

Account manager/financial securities advisor Capesky Insurance and Wealth Management

Johnathan Pollock

Steve Meehan

“We’ve heard a lot about this for a number of years, so we’ve had time to prepare.

This is something everyone should have been doing, and recent reports show that most people are.

From my perspective, I’ve been very clear with clients in talking to them about the cost of investment. Clients understand that nothing is free, and those who don’t want to pay might go to roboadvisors.

One really good thing about CRM2 is that a lot of fund companies are giving us the ability to lower the cost to clients.

For instance, for the last few years, I’ve been talking to clients about fee-based [advice].”

“Our business is always growing and adapting to provide better service to clients. This is particularly evident when focusing on compliance. Although the added documentation and time-spend can appear a nuisance, this is in the best interests of clients. It improves clarity and empowers clients to know more about their financial plans and the work we do.

It also gives advisors the opportunity to reflect on our practices and focus on serving clients at an optimum level.

A few advisors will likely leave the business, and that’s OK. It will weed out part-time and less-than-professional advisors who may not be the best fit for this career in the first place.”

“I don’t think it will be overly difficult as long as advisors embrace it and be proactive, not reactive. Advisors need to talk [to their clients] about what CRM2 is and what they’re doing to deal with it.

I think [advisors should] take a look at the options out there and embrace things such as investment counsellors to help reduce clients’ fees, F-class units or things priced more effectively – but most important, be upfront and transparent with the client.

One of the unfortunate things about CRM2 is that it talks about the advisor being the bad guy, but I feel the opposite.

The advisor is the most important part of the equation.”

President and CEO Evolution Wealth Advisors

EYEING THE FINISH LINE By the middle of next year, CRM2 will have reached full implementation. Advisors are – or at least should be – preparing to switch their annual reporting processes, as demanded by the latest regulatory changes. Naturally, some industry members are digging in their heels. They’re arguing the changes are too much of a hassle to enact. But many advisors counter, these processes should have been in place long ago. Not only has the industry received ample notice of the changes, they say, but also many are common-sense practices a majority of advisors are already following.

6

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UPFRONT

STATISTICS

Coming to Canada

ON THE RIGHT TRACK In the race to be ready for retirement, immigrants in Alberta are far and away the closest to having the savings required.

That said, immigrants in other provinces also appear to be on the right track, having saved more than the Canadian average.

Newcomers have a strong focus on saving and represent a potentially lucrative market for advisors CANADA’S POSITION in relation to immigrants was front and centre during the recent election, and a BMO survey is positioning newcomers as great potential clients for advisors. Canadian advisors live in one of the most multicultural countries in the world. They have the opportunity to be valuable resources to immigrants not only as they set up a new life, but also as they prepare for their retirements.

Making the Financial Transition is a series

of three BMO studies examining a variety of financial issues related to people who have moved to Canada within the last 10 years.

“Given the challenges associated with starting a new life in a foreign country, it’s encouraging to see [that] new Canadians are confident in their ability to achieve their ideal retirement lifestyle,” says Charyl Galpin, head of BMO Nesbitt Burns, a division of BMO Wealth Management. “However, they still have a way to go before reaching their target.”

NATIONAL Average amount believed to be needed for retirement:

$660,000

Average amount saved by immigrants:

$98,600

Average amount saved by Canadians overall:

$47,070

Amount average immigrants bring with them to Canada

$20,277

Amount average immigrants have left over after paying for the move

53%

Percentage of immigrants who use that remaining money to save for retirement

$45,902

$2,300

Amount average immigrants send back home to their families each year Source: Making the Financial Transition, BMO, April 2015

AVERAGE AGE OF RETIREMENT

SOME WORK TO BE DONE

It appears immigrants are a little ahead of the Canadian average when it comes to the age they retire. They opt out of the workforce about one to three years earlier than the national average.

Albertan immigrants might have the highest average retirement savings, but they’re also quite high on the list of those with no retirement savings. Quebecers have the most work to do, though.

Percentage with no retirement savings 100 80

Region

Age

National (overall)

64

National (immigrants)

63

Quebec

64

Ontario

63

Alberta

61

BC

62

60

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34%

40% 32%

26%

0

Source: xxxxxxx

8

48%

40

Sources: Sun Life Unretirement Index 2015; Making the Financial Transition, BMO, October 2015

BC

QUEBEC

Average amount believed to be needed for retirement:

Average amount believed to be needed for retirement:

$567,000

$484,600

Average amount saved by immigrants:

Average amount saved by immigrants:

$56,700

$64,100

ONTARIO Average amount believed to be needed for retirement:

$815,200

Average amount saved by immigrants:

$90,200

ALBERTA Average amount believed to be needed for retirement:

$752,000

Average amount saved by immigrants:

$361,100

Source: Making the Financial Transition, BMO, October 2015

GENERATION GAP

DARE TO DREAM

Not many immigrant parents expect their children to support them financially or otherwise in their retirement – but it’s a role they’re largely prepared to play for their own parents.

The retirement dream appears well in reach for most immigrants – or at least they think so. In most provinces, almost two-thirds of immigrants consider themselves well on track for retirement.

Immigrants who anticipate having to support their parents in retirement

Immigrants who expect their children to help them in their retirement

100

Percentage confident they’ll be able to afford their ideal retirement

90 80 70 60 50 40 30 20

61% 53%

53% 31%

52%

51%

35% 24%

30%

26%

10 0

National

Quebec

Ontario

Alberta

BC

Source: Making the Financial Transition, BMO, October 2015

National

65%

Quebec

66%

Ontario

62%

Alberta

58%

BC

66% 0

20

40

60

80

100

Source: Making the Financial Transition, BMO, October 2015

www.wealthprofessional.ca

9

UPFRONT

NEWS ANALYSIS

The banks go robo Full-service advisors might be alarmed by the big banks’ moves to launch their own robo-advisors.

But they may not be the ones who really have to worry THE BANK of Montreal announced in early October it would open a robo-advisor service, the first of the big banks to do so. Since then, at least three of the other Big Six banks – RBC, CIBC and Scotiabank – have either expressed an intention to start a robo-advisor service or are exploring the possibility.

Not surprisingly, seasoned industry veterans understand the move although have reservations.

“Good, bad or otherwise, I can certainly see why banks are keen on providing a robo-advisor in every branch,” says Stephen Jones, an advisor with Assante Wealth Management. “When I first started my

robo-advisor becomes one of the most obvious vehicles they can use to generate additional investment business at the branch level. Anyone who has dealt with a bank branch in recent years knows how inconsistent the service and advice truly can be. Branch employees who are good at what they do move on to bigger branches or get promoted to head office; those who aren’t tend to move on to other jobs in other industries.

Wealth Professional recently asked a broker working for a bank-owned firm why banks are pursuing robo-advisor services.

His sentiments weren’t much different than

“Providing consistent and appropriate advice at the highest level is a bank’s biggest challenge. Robo-advisors are high-tech, and they’re cheap” Stephen Jones, Assante Wealth Management financial planning business some 20 years ago, my bank manager admitted that he had to provide banking services to over 8,000 clients at his Waterloo branch. Providing consistent and appropriate advice at the highest level is a bank’s biggest challenge.

Robo-advisors are high-tech, and they’re cheap.”

As the banks move to capture greater market share in wealth management, the

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Jones’s; he pointed out, a digital service would at least provide the consistent delivery of advice branch clients are looking for while delivering that service at a much lower cost than human advisors.

Translation: branch employees might want to dust off their resumes. If roboadvisors gain serious traction with clients at the branch level, there could be serious job cuts as human advisors are made redundant.

Ironically, full-service advisors might be sitting pretty as a result of the banks’ rush to enter the digital fray. That’s because the value proposition offered by these dedicated professionals is easily differentiated from the banks’ robotic experience.

“You go to the bank, fill out their questionnaires – short or long – and bingo!

You’re balanced. You’re moderate and 45 years old,” says Investia Financial Services advisor Mark Matsumoto. “Therefore you need our bond fund, income fund, Canadian fund, balanced fund, global fund, Europe fund and global balanced fund. Robo-advisors might be able to do this on an automated basis, but it’s not a person. Bankers do this already, but it’s a nice, well-dressed person behind a desk telling you what to do and answering questions, so people think their advice is not the same as

THE BANKS’ ROBOADVISOR PLANS RBC announced in October that it’s looking at digital advice CIBC has launched a digital service for high-net-worth investors BMO plans to open a robo-advisor service by end of 2015 TD Ameritrade already announced its plans. Can TD be far behind?

National Bank already has InvestCube, a robolike ETF portfolio service

the robot.”

Advisors might question the effectiveness of automated investment advice, but you

annualized growth rate of almost 75%.

The Scorpio Partnership, a leading consultancy in wealth management, believes

“You go to the bank, fill out their questionnaires – short or long – and bingo! You’re balanced. You’re moderate and 45 years old” Mark Matsumoto, Investia Financial Services certainly can’t argue with its growth.

MyPrivateBanking Research estimates by 2020, robo-advisors will have $220 billion in assets under management globally. That’s up from $14 billion at the end of 2014 – an

the most successful wealth managers will be those who can expertly combine robots and humans. Its extensive study of high-net-worth and ultra-high-net-worth investors suggests the two groups definitely value the human

touch, but digital technologies are catching up.

Jones, however, believes the banks won’t be able to expertly combine robots and humans without significant job loss.

“Any reliance on technology over human experience also has a cost – in my view, job loss at the local level,” he says. “It’s already started. Twenty years ago when I needed a $20,000 loan to start my business, the ‘yes or no’ lending decision was made by my Waterloo Bank manager, after he looked me in the eye and provided his judgment.

Today, a form is filled out, along with all other Waterloo applications, and left for Toronto to decide if we qualify for a loan.”

The banks might want to tread the roboadvisor waters carefully.

www.wealthprofessional.ca

11

UPFRONT

INTELLIGENCE CORPORATE ACQUIRER

TARGET

PRODUCTS COMMENTS

Canoe Financial

O’Leary Funds

W Brett Wilson and Kevin O'Leary of Dragons' Den fame cut a deal to combine their respective mutual fund businesses.

CEB

Wanted Technologies

Quebec City-based market intelligence provider Wanted Technologies joins a $3-billion market cap. In the process, the company ensures it has sufficient backing to grow its business.

Fiera Capital

Samson Capital Advisors

Fiera has completed its acquisition of Samson Capital Advisors, a US-based, fixed-income investment management firm.

Samson has US$7.2 billion in assets under management.

FS Group Holdings

Front Street Capital

An investor group has agreed to purchase a controlling interest in Toronto-based Front Street Capital. The new group intends to expand on Front Street's previous mutual fund and hedge fund success.

M&T Bank

Hudson City Bancorp

The Buffalo-based bank has finally completed its deal for Hudson City. The purchase was announced three years ago but delayed because of regulatory concerns.

Nasdaq Private Market

SecondMarket Solutions

The combination of the two firms gives private companies a platform on which to manage their equity. It also provides liquidity to pre-IPO investors.

Northern Property REIT

True North Apartment REIT

The two companies have combined to form Canada's thirdlargest, multi-family REIT. It will operate under the new name Northview Apartment REIT.

Royal Bank of Canada

City National

RBC has completed its acquisition of City National for US$5 billion, using US$2.6 billion in cash and 41.6 million RBC common shares.

Tab Payments

Velocity Mobile acquires the leading restaurant mobile-payment platform in Canada. The platform serves more than 100 premier restaurants in Toronto and Montreal.

Velocity Mobile

MD Financial Management revises fund facts

Canadian Medical Association-owned fund company MD Financial Management has revised the MERs for four of its strategic funds to reflect the ETF fees each of these funds invests in. The fees clients pay have not changed. But the underlying fees of the ETFs are now included in the fund facts for the MD Strategic Opportunities Fund; the MD Strategic Yield Fund; the MDPIM Strategic Opportunities Pool and the MDPIM Strategic Yield Pool. MD has more than $39 billion in assets under administration.

The company is dedicated to serving Canada’s physicians and their families.

Aston Hill funds get new names

CI Investments purchases First Asset

One of Canada’s leading mutual fund companies has leapt into the ETF marketplace. CI Investments has acquired First Asset, a Toronto-based asset manager with $3 billion in assets under management including $1.6 billion in active ETFs. Analysts estimate CI will pay upwards of $90 million for First Asset.

The purchase will give the company greater access to full-service brokers. It also will add an important product for the soon-to-be-launched, robo-advisor service at its Assante subsidiary. First Asset’s current management group will continue operating First Asset’s business after the transaction is completed sometime later this year.

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Toronto-based Aston Hill Asset Management has announced name changes for four of its mutual funds to more closely reflect the funds’ investment strategies. The funds’ investment objectives and managers will remain the same. Pending regulatory approval, the Aston Hill Capital Growth Fund will become the Aston Hill Total Return Fund, Aston Hill Capital Growth Class will become Aston Hill Total Return Class, the Aston Hill US Growth Fund will become the Aston Hill US Conservative Growth Fund, and Aston Hill US Growth Class will become Aston Hill US Conservative Growth Class.

PEOPLE Nonprofit fund company changes managers

Gestion Férique has announced that MFS Investment Management Canada has been appointed as one of three portfolio advisors for the Férique Equity Fund, ending Heaviest Inc.’s mandate to manage one-third of the fund. MFS will manage approximately 35% of the $515 million in assets, employing a bottom-up stock selection process and a rigorous approach to risk management. It invests in Canadian companies that offer good relative value compared to their peers, proven financial strength and a sustainable business model.

Any catalyst that can influence the price of potential stock choices is also important.

BMO cuts fees on several funds

Bank of Montreal plans to cut management fees on some of its funds.

Specifically, the Series F securities of BMO Global Strategic Bond Fund will drop from 0.65% to 0.45%. The Series A and Advisor Series securities of BMO LifeStage Plus 2022 Fund will go from 2.00% to 1.65%. Meanwhile, the Series A and Advisor Series securities of BMO LifeStage Plus 2026 Fund will drop from 2.25% to 2.15%. Finally, the Series L securities of the BMO Tactical Balanced ETF Fund will decrease from 0.30% to 0.25%.

O’Leary bond fund among those affected by merger

Montreal-based O’Leary Funds Management says its O’Leary Canadian Bond Yield Fund won’t be merged into the Canoe Bond Advantage Fund as previously planned.

However, it will be renamed the Canoe Canadian Corporate Bond Fund. Stanton Asset Management will become a subadvisor to the fund. The fund’s investment strategy also will change. The moves come as a result of the proposed merger of O’Leary Funds into Canoe Financial. The merger is still awaiting unitholder and regulatory approvals.

NAME

COMPANY

COMMENTS

Michael Koon Ming Choi

Sunwah International

Choi will become CEO of the TSX-listed, Asian-based financial services firm. Former CEO Douglas C. Betts will remain with the company as executive director.

Michael Denham

Business Development Bank of Canada

The newly appointed CEO brings more than 20 years of management experience to BDC. Most recently he led AquaTerra, one of Canada’s largest water delivery businesses.

Brad Doney

FAIR Canada

The long-time industry executive, whose previous experience includes stints as general counsel at Merrill Lynch Canada and Midland Walwyn, has joined the board of the investor advocacy group.

John Levac

Accord Financial

The 25-year veteran of the commercial financing industry will lead Accord Financial’s expansion in Ontario.

Scott F. Powers

Sun Life Financial

The recently retired CEO of State Street Advisors brings more than three decades of investment management experience to Sun Life’s board.

Lisa Skakun

Mogo Finance Technology

Skakun joins the Fintech company in the newly created role of chief legal and administrative officer. He is based in Mogo's Vancouver office.

Blake Tennant

Canaccord Genuity

The former investment banker, recently appointed managing director of industrials and infrastructure services, will strengthen Canaccord Genuity's infrastructure business.

Tom Woods

Alberta Investment Management Corporation

The former CIBC executive, who retired at the end of 2014, brings his extensive experience to the board of Alberta’s largest institutional investment manager.

Bill Morneau heads to Ottawa After winning the riding of Toronto Centre in the Oct. 19 federal election, Bill Morneau has stepped down as executive chairman of Morneau Shepell.

He will no longer be involved in the company’s management. The son of the company’s founder, Morneau has spent years building Morneau Shepell into one of Canada’s leading human resources and pension consultancies. Jill Denham, who has served as a board member since 2008, will take over as chair of the board. Alan Torrie will continue leading Morneau Shepell as CEO.

Howard Atkinson to leave Horizons ETFs One of the biggest names in the Canadian ETF industry will retire at the end of 2015. Howard Atkinson will step down as president of Horizons ETFs. He joined the company in 2006 as one of its founding principals and has been responsible for the distribution and marketing activities of the firm since then. Read the full story on page 16.

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13

UPFRONT

ALTERNATIVE INVESTMENT UPDATE

Bringing provinces in line, alternatively The latest offering memorandum amendments give Ontario investors a boost but in the process five other provinces take a hit

the specified income or asset thresholds, the annual limit gets bumped up to $30,000.

Finally, anyone who receives financial advice from a registered advisor will be able to invest up to $100,000 in a 12-month period. None of this applies to accredited investors or those exempt under the family, friends and business associates prospectus exemption. Under the new rules investors have the right to withdraw their offer to purchase securities within two days of signing a subscription agreement.

“While our industry is receptive of the

“The retraction of historical investor rights ... may not sit well ... .

IT WAS mixed emotions for the exempt market after securities regulators in six provinces finalized offering memorandum prospectus exemptions.

“In aggregate, this is a very good day for both issuers and dealers operating in the exempt market but the limits that look to be coming to other provinces do ultimately put a dampener on the news,” said Craig Skauge, president and chair of the National Exempt

NEWS BRIEFS

Market Association.

The amendments will introduce an offering memorandum (OM) prospectus exemption in Ontario. They will modify the existing exemption in Alberta, New Brunswick, Nova Scotia, Quebec and Saskatchewan.

Non-accredited investors who don’t meet income and asset thresholds will be limited to $10,000 in a 12-month period based on the OM exemption. If an individual meets

Lightwater Partners wins prestigious hedge fund award

Lightwater’s Nimble Fund won first place at the 2015 Canadian Hedge Fund Awards for achieving a 63% one-year return in the equity-focused category.

Lighterwater specializes in mid-cap Canadian stocks that are under-followed by investors and either undervalued or overvalued by the market. It has been able to provide advisors and family offices lower risk and volatility over the past eight years since its founding in 2007 while outperforming the market. Lightwater has achieved an annualized return of 32% since inception.

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harmonization efforts being made, the retraction of historical investor rights in these other provinces will not sit well and may be subject to some opposition.”

The offering memorandum exemption was designed to facilitate capital-raising by allowing issuers to solicit investments from a wider range of investors than they would be able to under other prospectus exemptions, provided that certain conditions are met.

“In an effort to harmonize, the other jurisdictions have agreed to adjust their limits to the same levels as they don’t feel it will have a large impact on the amount of capital raised with this exemption, and will protect investors in those cases where there were concerns about too much money being placed in alternative investments by retail investors,” Skauge said.

NexusCrowd brings commercial real estate online

This is Canada’s first online investment offering for commercial real estate. The issue provided accredited investors with the opportunity to participate in the development of a $100-million retail mall in the Toronto area. The company is the first investment platform in Canada providing accredited investors with exclusive access to co-invest alongside institutional investors in deals that have reached at least 50% of their funding target. Investors can buy in for as little as $10,000.

Q&A

Michael Prittie Portfolio manager/ senior financial advisor MANDEVILLE PRIVATE CLIENT

Fast fact Successful people manage their finances in a specific way.

Prittie has analyzed and distilled this information over the last 28 years into “The Five Laws of Wealth Creation.”

Is private equity in for a growth spurt?

What is the state of private equity investments in Canada today?

Private-equity (PE) exposure has grown dramatically over the past 10 years and Canada is following the lead set in the US and globally. The future for private equity is bright – and further growth and democratization is supported by regulatory reform that is liberalizing access.

What sectors and industries are getting most of your attention and that of advisors?

Personally I am utilizing several Private Equity products – some are short-/mid-term income oriented and some are long-term growth oriented. Portland Investment Counsel’s Private Income Fund has a steady annual yield of about 8% (paid monthly) yet similar volatility/ variability in price to that of iShares short-term bond ETF, which is very compelling.

Timbercreek Investment Management has a fourquadrant product offering a mix of private/public real estate and Private/public debt....a yield of 5% with opportunity for capital growth. By combining private with public equity it offers quarterly liquidity and I have had great success with their previous US MultiResidential Opportunities Fund.

For longer-term investors I’m very pleased with the unique aspects of Portland’s Global Energy Efficient Renewable Energy Fund (GEEREF), which offers the ability to co-invest with the European Investment Bank, Germany and Norway. This product offers excellent

Mackenzie gets into the alternatives game

Mackenzie Financial has launched its Mackenzie Diversified Alternatives Fund. The fund provides Canadian retail investors access to alternative asset classes typically available only to pension funds and institutional investors. Specifically, the fund invests in real estate, infrastructure, emerging market debt, micro-cap equities, foreign currencies, preferred shares and commodities. It also promises access to an absolute return strategy by investing in the Mackenzie Unconstrained Fixed Income Fund.

growth potential and first rights to capital protection, income stream and return of capital.

What are the biggest challenges in private equity today?

Biggest challenges: access, quality and transparency.

Regulatory environment remains protectionist (except for institutional and other accredited investors), but slowly regulatory reform is improving access and helping to promote greater transparency and quality. Finding an advisor who has access to highquality private equity through their dealer is at times a challenge. Another challenge an advisor qualified, experienced and knowledgeable with private equity who can act on a client’s behalf – especially if the client isn’t accredited. This means working predominately with a registered portfolio manager who can act as the accredited entity on behalf of clients where suitable.

Why do you believe in private-equity investments?

High-quality PE investments have proven to be great creators of wealth. Most very wealthy people we know created wealth owning a private business which they understood intimately, was domiciled in a growth industry and held by them for a long time. The objective of the average Canadian investor is no different than that of the wealthy – they both desire to protect and grow their capital. Why then, should the methodology be different?

CIBC Mellon wins KKR’s trust

CIBC Mellon has won the right to provide asset servicing for Cygnus Investment Partners’ new set of alternative investment solutions. CIBC Mellon will provide Cygnus with custody and safekeeping of client assets; foreign exchange processing and settlement; and investment information delivery. In the last issue, we highlighted the move by Cygnus to offer Canadian institutional and qualified individual investors with access to a global and diversified suite of KKR products at unusually low minimums. KKR is a leader in alternative investments.

Timbereek’s newest fund does first big raise

Timbereek completed first close of its Canadian Multi-Residential Value Add Fund with aggregate commitments of approximately $100 million from Canadian and European institutional investors. This is Timbercreek’s fourth Canadian fund focusing on rehabilitating and repositioning well-located, multi-residential assets in key Canadian markets. It’ll acquire assets where value can be achieved through Timbercreek’s active management and value enhancement program. Timbercreek has deployed more than $3 billion in multi-residential real estate in North America. www.wealthprofessional.ca

15

UPFRONT

ETF UPDATE NEWS BRIEFS Manulife adds to its health care offerings Manulife Financial has filed a preliminary prospectus for the Manulife Global Healthcare Trust, a closed-end investment fund. Investing in global health care companies developing new drugs, therapies or medical devices, the trust will seek to provide unitholders with opportunities for capital appreciation and monthly cash distributions.

Managed by Montreal-based Sectoral Asset Management, a portfolio manager specializing in biotech and healthcare portfolios, the fund is expected to provide an initial investment yield of 5%.

TD Asset Management expands DIY offerings TD Bank’s asset-management business has extended its D-Series offering by 33 investment funds. The D-Series provides self-directed investors with low-cost mutual funds whose MERs are lower than typical. Investors now have 53 options available through the TD D-Series. They include some very interesting products such as the TD Risk Managed Equity Funds and TD Low Volatility Funds. D-Series is designed to meet the broad needs of self-directed investors looking to build portfolios with funds offering growth and stability, as well as multiple income options.

Fidelity expands star manager’s duties Fidelity Canada has launched its North American Equity Class, an investment solution taking advantage of portfolio manager Darren Lekkerkerker’s success with the company’s Canadian Balanced Fund.

Lekkerkerker is one of Fidelity Canada’s most successful portfolio managers.

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This new fund takes the manager farther field, broadening the stocks available to those in the U.S. as well as Canada.

Focusing on mid- and large-cap stocks, Lekkerkerker looks for companies that work for shareholders and are trading at attractive valuations. The fund can invest up to 20% outside Canada and the U.S.

Middlefield raises $60 million for new fund

Globalance Dividend Growers has completed its initial public offering of six million shares at $10 per equity share for gross proceeds of $60 million. The shares are listed on the Toronto Stock Exchange under the symbol GBF. The fund’s investment objectives are: provide holders of shares with stable monthly cash distributions; grow distributions over time; and enhance long-term total return through capital appreciation of the fund’s investment portfolio.

Middlefield Capital Corporation, the advisor, will provide investment management advice to the Fund.

New ETF takes bite out of market The ETF Managers Group has launched the first ETF to focus exclusively on restaurants.

Trading under the symbol BITE, the companies in the fund represent more than 50% of the world’s most recognizable brands – including Starbucks – operating in quick service, fast casual, casual dining and fine dining. With the average American spending $2,600 annually at restaurants, the pure-play ETF gives advisors a good bet on discretionary spending. The ETF itself tracks an equal-weighted index of American restaurant stocks with market caps greater than $200 million and average daily turnover of $1 million or more.

Leaving the horizon behind As he retires, the face of Canada’s ETF industry is leaving the company he helped found strongly positioned for the future Howard Atkinson, a founding principal and president of Horizons ETFs Management (Canada), is retiring after almost a decade with the firm – leaving behind a legacy and a solid foundation for Horizons to continue its growth and success.

“Howard has not only been the face of Horizons ETFs for the last decade, but in many ways has also been the face of the Canadian ETF industry,” said Steven Hawkins, Co-CEO of Horizons ETFs. “He joined Horizons ETFs when it was just a start-up and has been vital to building our business to become one of Canada’s largest ETF providers.”

Since joining the firm in 2006, Atkinson has been responsible for distribution and marketing activities at Horizons.

“I’m in my 29th year of investment management and I even bought the first ETF listed in Canada for my client accounts back in the early 1990s. My career has been extremely exciting and fulfilling, having spent the bulk of it championing this simple product structure – the ETF – a game-changer that has revolutionized the global investment landscape.

With ETFs, investors of all levels have the ability to build low-cost, transparent, and ultimately better portfolios,” said Atkinson.

Prior to joining Horizons, Atkinson worked at Barclays Global Investors Canada (now iShares). He has also held positions with a national investment dealer and major mutual fund companies.

Atkinson also represented Horizons ETFs as one of three founding members of the

Canadian ETF Association (CETFA). He was elected its inaugural chair in 2011, holding the position until last May. CETFA has undertaken some major initiatives. Three of them are: increasing CETFA membership; enabling MFDA advisors to access ETFs; and having Canadian broker/dealers report ETF holdings to ETF manufacturers. Under Atkinson’s watch all three of these have been, or are close

“I couldn’t be more proud of the evolution of Horizons ETFs from its bull and bear roots ... ” to being, achieved.

Atkinson will spend the next two months with Horizons ETFs’ senior management team working through an orderly transition of his day-to-day responsibilities.

“I couldn’t be more proud of the evolution of Horizons ETFs from its ‘bull and bear’ roots to achieving three unique, award-winning product line-ups of index, actively managed and leveraged ETFs,” Atkinson said. “Horizons ETFs is well positioned to continue leading in ETF innovation.”

“Howard has built and mentored an exceptional sales and marketing team here at the firm and leaves behind a lasting legacy,” said Hawkins.

Q&A

Pat Chiefalo Head of Canadian Product ISHARES BLACKROCK

Emerging market volatility Do you think emerging markets are an under-owned equity class?

Years in the industry 15

I think they’ve definitely been out of favour over the last couple of years. If you look at flows, at least with regards to the money we watch in the ETF space, there’s definitely been if not outflows then very much subdued flows into emerging markets than what you’ve seen in the past.

Fast Fact Chiefalo ended up in financial services after originally earning a degree in engineering from the University of Toronto

Well, I think there’s been a little bit of concern around volatility in those markets. There was some pressure with regards to oil prices that caused some increased volatility in those markets. So when people look to invest they have a little bit of concern when they see that volatility and I think they’ve scaled back their allocation to emerging markets.

Why do you think they’ve been out of favour?

Over the last months issues in China have been at the forefront of the news. Brazil and Russia have also had their troubles as well as India to a lesser extent. Have the issues affecting the BRIC countries affected perceptions around emerging markets ETFs? I don’t know that this is just an ETF-related matter; overall there’s been a little bit of concern around emerging markets. People haven’t put as much capital towards it as they have in the past. Certainly, some things you’re seeing in the macro headlines have caused this.

It’s not necessarily from an asset- allocation perspective; people woke up and said, “I don’t want to have any emerging markets.”

I think people followed some of these headlines and have dialled down, becoming more risk averse when it comes to that exposure.

Are there any particular markets advisors should focus on in particular?

As opposed to market I prefer to look it as a style. With the added volatility something I think investors appreciate is if we have the ability to dial down risk and keep people invested in those underlying equities. If people do have concerns with emergingmarket volatility but still want to gain exposure to those markets, there’s that minimum volatility strategy that’s able to dial down that risk profile but still keep investors exposed.

What are the main things advisors should keep in mind when using emerging market ETFs? From an asset-allocation standpoint, you definitely don’t want to make it the majority of your international exposure. Developed markets should always represent the core of your international equity exposure, in my opinion. Emerging markets you can certainly have on a relative basis compared to your developed market and definitely if you want to think about, if you have some heightened sensitive to risk then certainly consider a minimum volatility strategy.

www.wealthprofessional.ca

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UPFRONT

ETF UPDATE

The core and more Using a core-plus strategy for fixed-income investing in challenging market conditions can reap rewards

CORE-PLUS STRATEGY AT A GLANCE enhances yield through exposure to high-yield and preferred shares builds returns in bull markets provides downside protection typical balanced portfolio, the risk/return characteristics are enhanced. Returns rise with high-yield corporates and preferred shares. As well, these securities are in general positively related to the growth phase of the economic cycle, corresponding to rising inflation and interest rates. Moreover, studies

The promise of high yields can be enticing.

But keep in mind the market demands higher returns for a reason CURRENT MARKET conditions can best be described as challenging for bond investors. There are historically low yields; rising interest rates in the US; slowing global growth (specifically in Europe and China); and compressed corporate spreads. Yields in the US and Canada are at extremely low levels. In the US, 10-year treasury bonds are yielding 2.03%. In Canada (as of Oct. 21), it’s an anemic 1.57%. This barely keeps pace with inflation.

There’s also the prospect of US interest

12

the number of US Federal Reserve interest-rate increases since 1948

Gained

what high-grade corporate bonds have done half those times

rates rising. Central banks including the US Federal Reserve have made it clear interest rates will remain low – despite talking about the potential for higher rates. The risk/reward picture is bleak. Even if the Fed raises rates, it’s not necessarily all gloom and doom.

According to Ned Davis Research, of the 12 Fed hikes since 1948, investment-grade bonds were positive half the time. Contrary to popular belief, historically, tightening monetary policy cycles don’t necessarily mean huge losses in bond markets.

Nevertheless, for argument’s sake, let’s assume the Fed raises rates and at the very least, government bonds lose value. One possible solution for enhancing yield while maintaining downside protection is, use an actively managed core-plus strategy. Start with a value-based, actively managed core portfolio, and add high-yield and preferred shares.

Benefits of a core-plus strategy By employing a core-plus strategy with a

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suggest a core-plus strategy provides similar downside protection against shocks such as stock-market corrections and sharp declines in oil prices. The studies also suggest this strategy provides enhanced returns in bull markets and rising interest-rates environments. The added yield compensates for duration-based price declines.

A note of caution here: beware of the value trap in chasing higher yields. The promise of high yields can be very enticing. But keep in mind the market demands higher returns for a reason. One efficient way of gaining exposure to these areas is through broadbased ETFs. However, skilled portfolio management based on fundamental research and rigour is a smarter way of mitigating the higher risk involved in preferred shares and high-yield bonds.

Questrade Wealth Management Inc. (“QWM”) is a registered portfolio manager. QWM manages and issues the QWM family of exchange traded funds. The views and opinions expressed herein are those of the author and do not necessarily reflect the view of QWM. QWM does not guarantee the quality, accuracy, completeness or timeliness of the information provided. QWM assumes no obligation to update the information.

QWM disclaims all warranties, representations and conditions regarding use of the information provided.

James Youn, CFA, is a senior portfolio manager with Questrade Wealth Management.

UPFRONT

OPINION

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

Planning for the unexpected The best time to start working on your succession plan, writes Brad Brain, is right now

SOMEONE RECENTLY asked me if succession planning should start 10 years prior to retirement, as opposed to one. My response was, why wait at all? The right time to think about succession planning is as soon as possible.

Advisors need to realize succession planning isn’t always triggered by a founder’s decision to leave on his or her own terms. Even with the most fastidious planning possible, we are all vulnerable to game-changing factors we have absolutely no control over, and it makes no sense to take these things for granted.

What if your health deteriorates? What if there’s a lengthy family emergency? What if you just get sick and tired of heavy-handed regulatory regimes? What if the joy you used to find in your work is no longer there?

It’s an illusion to think you’re in full control of every aspect that’s going to affect the terms and timing of your succession plan. And it’s not even limited to the stuff that happens to you personally.

A good friend of mine bought a practice a few years back, but she didn’t set out to buy a business. She had just moved to town and approached a local advisor about the possibility of doing some joint work. As it turns out, the local advisor was looking to immediately divest herself from the responsibilities of her practice because of her husband’s failing health.

The important point here is that it wasn’t a change in her own health that forced this

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advisor to look for an exit; rather, a change in her spouse’s health. It was purely good fortune, rather than premeditated planning, that the

you’re decades from your planned retirement, clients will appreciate knowing in advance that if something happens to you, they’ll still have someone looking after them.

Finally, giving yourself plenty of lead time will allow you ability to adapt to changing circumstances. I had a young fellow keenly interested in buying my own practice. It was only after he worked with me for a year in a junior capacity that it became blatantly obvious he was not at all suited to take over. Best to find that out sooner rather than later.

Early succession planning is a very good idea, to be prepared for unexpected contingencies. But it makes good planning sense, too. There are certain matters to consider in advance – both financial and non-financial – for maximizing the monetization of your practice upon succession, as well as addressing any other objectives you may have.

Some of the variables that will impact the market value of your practice include: Do

“Early succession planning is a very good idea, to be prepared for unexpected contingencies. But it makes good planning sense, too” buyer and seller happened to cross paths at the right time. Succession planning should’nt be left to something as fickle as good fortune.

Even if everything is sailing along smoothly right now, it pays to have a Plan B. Another friend of mine is a key person at a cutting-edge financial-planning firm. These guys are at the top of the food chain, with a dominant market position, and they’re in complete control of their careers. And even they have a Plan B. Why would a firm that already gets to call all of its own shots need a Plan B? It’s simple.

Just because everything’s going great now is no assurance the situation won’t change in the future.

Another thing to consider is what your clients think about the situation. This isn’t something clients will always ask about, but that doesn’t mean they aren’t thinking about it.

What happens to their financial plans if their advisor is no longer in the picture? Even if

you have a clean balance sheet and income statement? Do you have structures and systems in place that make the practice less dependent on any one individual? How much of your practice is based on recurring revenue?

Are there any messes that need cleaning up?

These issues typically will take some time to work through and get into place. So, again, the sooner you start working on them, the better.

It might take several years to package your practice for sale.

Ask yourself what you want your succession plan to look like. Because the best time to work on it is as soon as possible.

Brad Brain, BA, CFP, RFP, CLU, ChFC, CHS, is a registered financial planner and the president of Brad Brain Financial Planning, located in Fort St. John, BC.

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For Advisor Use Only. © 2015 Morningstar Research Inc. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. 1Morningstar RatingTM is the overall rating for Class F units as at September 30, 2015 and is subject to change monthly. Renaissance Optimal Income Portfolio, Class F received a Morningstar Rating of 5 stars over 3 years (325 funds rated) and 5 stars over 5 years (234 funds rated). The overall 5 star rating is calculated from a fund’s 3- and 5-year returns measured against 91-day Treasury bill and peer group returns. The top 10% of the funds in a category get five stars. For greater details see www.morningstar.ca. 2MER annualized as at August 31, 2014. Please refer to the annual Management Report of Fund Performance for further details. 3Source: Morningstar Direct as at September 30, 2015. Risk-adjusted returns are measured by the Sharpe ratio for the Class F units of the fund over 5 years to September 30, 2015 and compare the ratio of the fund against the ratio of the average for the Canadian Fixed Income Balanced Category. (Fund: 1.40, Category Average: 1.03). Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. The information presented is accurate at the time of first printing, and is subject to change without notice. Please read the Fund Facts or the Renaissance Investments Simplified Prospectus before investing. Mutual funds are not guaranteed, their values may change frequently and past performance may not be repeated. ®Renaissance Investments is offered by, and is a registered trademark of CIBC Asset Management Inc.

PEOPLE

INDUSTRY ICON

THE HUMAN TOUCH Robert Roby’s relationships with his clients transcend the normal client bond, allowing him to become one of the best advisors in the country

“FROM THE depths of your soul, what is it that you want?” Bob Roby already knew the answer, but he wanted his client to tell him.

Bill, who had served in the military and suffered from post-traumatic stress disorder (PTSD), looked at his advisor and said, “I’d like to repair the relationship with my sons.”

Two of Bill’s kids were Roby’s clients as well, so he suggested facilitating a family meeting. As soon as the meeting started, the agenda got thrown out the window.

“When we first started, Bill got up and he started crying,” Roby says. “He calmed down, and he had this wonderful conversation with his family for two hours. He apologized to his sons and his grandchildren for not having been the father he should be.”

A month later Roby, received a call from one of Bill’s sons, who said, “My father has changed so much I don’t recognize him.”

Bill was off his medications and living a great life. “Bill said to me, ‘Bob, I’ve been going to a psychiatrist, psychologists, even the Benedictine monks, and it didn’t solve it,’” Roby recalls. “But this removed all the baggage off of me.’”

Tragically, an e-mail from Bill’s wife a few months later shattered that happiness: One of their sons had committed suicide at the age of 50. Before he died, unbeknownst to his family, he had sent Roby an e-mail

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expressing his happiness that his parents were moving forward in fulfilling some of their objectives. Three months after their son’s passing, Roby shared that e-mail with Bill and his family. It helped them come to terms with the tragedy.

not about being an advisor. It’s about being a human being.”

A helping hand At a young age, Roby learned the value of relying on others for help, a concept that

“During that period of homelessness, there were some key people who came out of the woodwork; people I didn’t know, who helped me a lot. Those values have transferred into me over time. That’s my inner motivation: to help people find their own passions” Shortly after, Bill asked Roby over to his house. He stood beside him and said, “Thank you for saving my life.” He opened his hand, and he was holding a war medal. “He gave me that medal, which I wear every day on my lapel,” Roby says. “Because of that meeting, Bill was able to apologize to his son before he died, and that had given him such great relief; otherwise, he didn’t think he could’ve lived through this.

“This, to me, is what I do for a living,” Roby says. “The money is the easy part. It’s

eventually became the cornerstone of his practice and his motivation as an advisor.

“I was homeless by the age of 16, and I made it through with a lot of hard work,” he says. “And I found that that during that period of time, there were some key people who came out of the woodwork, people I didn’t know, who helped me a lot. Those values have transferred into me over time. That’s my inner motivation: to help people find their own passions, because at the end of the day my clients are providing me with my passion.”

PROFILE Name: Bob Roby Company: Roby Retirement and Wealth Team Title: Senior wealth advisor Age: 62 Years in the industry: 30+ Industry involvement: The fact that I maintained my trust and integrity throughout my career, and as a result, my clients never lost any money in the markets

www.wealthprofessional.ca

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PEOPLE

INDUSTRY ICON

Roby got his start, like many in the industry, at a bank. But a job that was all about selling product and meeting quota didn’t sit well with him. “I had that eureka moment that this isn’t what this is supposed to be,” he says.

So a decade ago, he started the Roby Retirement and Wealth Team. “My investment philosophy really took hold; my beliefs really took hold,” he says.

That investment philosophy is relatively

is just as firmly established as his investment philosophy. “It’s not supposed to be about the money,” he says. “It’s supposed to be about helping clients fulfil their life objectives and then merging the money they have with those dreams.”

For example, a client recently came in and said he had decided to put $1,000 a month into an RRSP. “I looked at him and said, ‘No, you’re not,’” Roby recalls. “I said, ‘At what

“It’s not supposed to be about the money.

It’s supposed to be about helping clients fulfil their life objectives and then merging the money they have with those dreams” simple and hasn’t changed throughout his career. Roby espouses the Warren Buffet approach: buying great companies and holding them for the long term – his clients own shares in the Coca-Colas, Pepsis and Johnson & Johnsons of the world. Roby focuses on companies that pay a dividend.

“Over the years, I’ve built a huge source of income for my clients from the dividends created by the investments,” he says. “I have clients whose dividends are bigger than their pensions.”

That’s largely because of the education Roby has given his clients, allowing them to appreciate the value of a market downturn and reinvest the dividends when the share prices are lower.

“We always know the market is going back up,” he says. “How we act and what we do during market downturns is directly proportionate to the amount of wealth we’re going to get, and that’s what creates true wealth.”

The best is yet to come Roby’s general approach to providing advice

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expense?’ We did a calculation, and we came to $400 a month, because the other $600 meant they couldn’t travel; they couldn’t live for today. You’re living to work for a better future, not at the expense of today.”

While Roby welcomes CRM2, he’s going above and beyond by updating his systems, relevant software and CRM programs. It’s allowing him to open his doors to 50 new clients – the first time he has been able to do so since 2008.

Roby will still meet with every client, but he has also hired an insurance specialist. As well, he retains access to some of the best minds in the industry when it comes to estate planning, law and banking. “I’m the quarterback and I can make those long and short passes to create the whole solution for clients,” he says.

And despite turning 62, he’s showing no signs of slowing down.

“People say, ‘Bob, aren’t you close to retiring?’ I say no. My goal is to become the oldest advisor in Canada. I tell them, when you come in and I don’t know who you are, that’s the time to run.”

ROBY’S KEYS TO SUCCESS SIMPLIFICATION “That’s the first step of success. Our industry complicates things. Financial plans are 300 pages long. At the end of the day, what do people want to know? How much money will I have when I retire? Will I have enough? How long do you expect me to live? How long will my money last? How much do I need to make? That’s a one-page thing.”

INTEGRITY “Integrity is never, ever changing your beliefs no matter how bad the news is, no matter how much stress and pressure there is, but sticking to what you believe in.”

TRUST “Trust is more than just a word. Trust is something you earn every day. You could have a client for 20 years who trusts you, and then tomorrow, that could all be blown by one thing.”

PERSEVERANCE “We’re going to persevere with our clients even though we have to tell them something they don’t want to hear.”

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FEATURES

COVER STORY: 2015 LIFESTYLE SURVEY

HOW THE OTHER HALF LIVES Our second-annual Lifestyle Survey may highlight a couple of troubling industry trends, but 2015 was a great year financially for most advisors HOW’S YOUR life? That’s what Wealth Professional was trying to find out and everyone – from young pups in their 20s starting out to advisors in their 90s – was well represented in our second-annual Lifestyle Survey.

The diversity of respondents doesn’t end there. There are the uber-rich advisors, of course. For the most part, however, the average advisor lives a similar lifestyle to that of most Canadians.

It seems advisors are beginning to find better work-life balance. The number working weekends declined. And advisors knocked

one hour out of their workdays, according to survey results.

What did catch our attention though, are some concerning industry trends.

First, the number of women entering financial services seems to be dropping. This is leading to a wider gender gap. In last year’s survey two thirds of advisors were male; this year that number jumped to 77%.

Another well-known issue was confirmed in our survey: the industry isn’t getting any younger. Last year, 70% of advisors who responded were between 40 and 64.

That number jumped this year to 75% of

respondents. Perhaps more concerning was, the number of advisors in their 20s and 30s also declined. It really doesn’t point to a healthy future for the financial advice industry in Canada.

Given the dearth of young advisors in the industry, there was one other concerning trend: 43% of advisors never go to the gym.

Apparently, advisors in the industry will have to work longer than they might have thought, so it’s time to start pumping iron. We’ll excuse the two advisors in their 90s.

But in all seriousness, this survey was designed to be a fun way of looking at how your colleagues are living. So enjoy.

ADVISORS’ AGES

91-plus

FEMALE

23.42%

30 – 34

40 – 44

5.99% 20 – 29

3.39%

10.94% 35 – 39

7.03%

60 – 64

10.42%

50 – 54 45 – 49

55 – 59

14.06%

0.52% 65 – 69

7.29%

17.97%

70 – 74

3.39%

19.01% 0.00%

76.58% MALE

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75 – 79 80 – 84 85 – 90

WHERE ADVISORS LIVE (BY PROVINCE) CITIES WHERE ADVISORS LIVE British Columbia

There were advisors from the major centres, of course: Vancouver, Edmonton, Calgary, Regina, Winnipeg, Toronto, Montreal and Halifax. But advisors also live in places such as Flin Flon, Man.; Barrie, Ont.; Biggar, Sask.; Dieppe, NB; Vermillion Bay, BC; Canmore Alta.; Truro, NS; Charlottetown, PEI; Beaconsfield, Que.; and Cornerbrook, NL. The map shows some of the cities where advisors live.

19.7%

Alberta

13.5%

Newfoundland and Labrador

1.3%

Manitoba

Saskatchewan

3.8%

4.42%

Ontario

48.3%

Quebec

4%

Prince Edward Island New 1% Burnswick Nova 1.3% Scotia

1.3%

Edmonton Nelson

Grande Prairie

Saskatoon

Laval

Montreal Cornerbrook St John’s

Ottawa

Vancouver Victoria Calgary Kelowna

Medicine Hat

Charlottetown Fredericton Regina

Winnipeg Brandon Hamilton

Kingston Toronto

Halifax

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FEATURES

COVER STORY: 2015 LIFESTYLE SURVEY

THE PROFESSION AT A GLANCE HOW LONG YOU BEEN IN THE INDUSTRY?

HOW LONG DO YOU WORK EVERY DAY?

The average advisor has been in the industry 17.79 years. Last year’s average was 14 years. The longest was 47 years.

17.79 yrs

47 yrs

8.09 h

AVERAGE

AVERAGE LAST YEAR

9.0 h

DO YOU WORK WEEKENDS? ANY MEMBERS OF FAMILY IN INDUSTRY BEFORE YOU?

INDEPENDENT VS ADVISOR NETWORK

38.34%

YES

Independent

12.23%

NO

87.77%

TOP FIVE DEALER GROUPS

3

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YES

NO

43.83%

56.17%

61.66% Network

1

2

4

5

FULL- VS PART-TIME ADVISORS

ADVISORS’ EDUCATION HIGHEST LEVEL OF EDUCATION

FULL-TIME

0.36%

96.89%

7.91%

Some high school

High school diploma

20.14% Graduate degree

PART-TIME

3.11%

23.38%

48.20%

Some university

Undergraduate degree The survey suggests many advisors are in the prime of their careers; they’re seasoned operators. The average time in the industry was 17.79 years, compared to the survey’s average of 14 years.

It also appears more advisors are embracing the independent life. The number of independents jumped to 38.34% from 32.7%.

Advisors still have their noses hard to the grindstone. It appears, however, the fight for balance between work and personal time has seen the scales shift away from the office.

Last year almost 55% of advisors said they worked weekends; 45% said they didn’t.

This year that was reversed: 44% work weekends and 56% take weekends off.

NUMBER OF CERTIFICATIONS

One

29.72%

Three

Two

32.87%

Four

19.58%

17.83% www.wealthprofessional.ca

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FEATURES

COVER STORY: 2015 LIFESTYLE SURVEY

ADVISOR FINANCIAL SNAPSHOT AMOUNT IN SAVINGS

Apparently, it has been a good year for advisors. Their savings accounts have seen a healthy boost to $46,215 – up almost $7,000 from last year.

$46,215 AVERAGE HOME EQUITY

Advisors also significantly increased the equity in their homes. The average was 64%. It’s a pretty impressive jump from the 46% reported last year.

DO YOU OWN HOUSE?

HOW MANY FUNDS?

50 HIGHEST

YES

93.15%

NO

6.85%

6.8 exchangetraded and mutual funds per advisor 0 LOWEST

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WHAT’S THE SIZE OF YOUR PERSONAL INVESTMENT PORTFOLIO?

$10.1 million

It was a very good year personally for a lot of advisors this year.

The average portfolio size jumped more than $100,000 to $654,023 from last year’s mark of $510,051.

$1,000 Smallest

$654,023 Average

DO YOU INVEST IN YOUR PERSONAL ACCOUNT USING SOPHISTICATED INVESTMENT TOOLS SUCH AS PUTS/ CALLS OR OPTIONS?

90.59% No

Largest

9.41%

DO YOU INVEST YOURSELF, OR DO YOU HAVE AN ADVISOR?

Self-directed

94.82%

Through an advisor

5.14%

Yes

There was a huge jump in the number of advisors investing directly: up to 94.82% from 79.8% last year.

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FEATURES

COVER STORY: 2015 LIFESTYLE SURVEY

RECREATION SNAPSHOT VACATION TIME PER YEAR

HOW OFTEN DO YOU GO TO THE GYM?

5.65%

10.95%

One week

Two weeks Never – 43.68% Once a week – 9.39%

24.73%

Three weeks

58.66%

Four weeks or more

Two to four times a week – 37.55% Five or more times a week – 9.39%

HOW ADVISORS SPEND THEIR RECREATION BUDGETS

Advisors spend their recreation budgets in this order:

1 travel

2 golf

3 vacations 4 sports

5 family

COUNTRY/PRIVATE CLUB MEMBERSHIP

74.63% No

6 food

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7 restaurants 8 kids

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9 trips

10 boating

25.36% Yes

ADVISORS’ HOBBIES

1

golf

2 travel

SOCIAL MEDIA SNAPSHOT TYPE OF MOBILE DEVICE

3 reading 4 hockey 5 sports

48.05% 24.68% 24.16% iPhone

Android

BlackBerry

6 skiing

3.12%

I’m old school – flip phone or other

7

gardening

8 fishing 9 hiking

SOCIAL MEDIA USE FREQUENCY

SOCIAL MEDIA PLATFORM

Never

10 photography 11 hunting 12 music

20.14% Occasionally

36.69%

13 cycling 14 scuba diving 15 woodworking

44% Facebook

38% LinkedIn

9.5% Twitter

1% Reddit

1.81% Instagram

Daily

43.17%

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FEATURES

COVER STORY: 2015 LIFESTYLE SURVEY

VEHICLE SNAPSHOT LEASE VS OWN

TYPES OF VEHICLES DRIVEN

Don’t have a car

0.71%

SUV

51.94%

Lease vehicle

25.44%

Sedan 39.93%

Own their car

73.85%

Sports car 8.13%

VEHICLE COST

25.80% Less than $20,000

10.25%

$20,000 – 25,000

7.77%

$25,000 – 30,000

12.37%

$30,000 – 40,000

14.84%

$50,000 – $80,000

$40,000 – 50,000

23.32%

$80,000plus

5.65%

ADVISORS’ HOME LIVES MARRIED

17.52%

NUMBER OF CHILDREN

None 14.96%

One 13.50%

Two 43.80%

Three 18.98%

Four or more 8.76%

No

82.48% Yes

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FASHION SNAPSHOT WHAT’S THE PRICE TAG ON YOUR BEST BUSINESS OUTFIT/SUIT?

DO BUSINESS IN A SUIT

$500 – 1,000

YES 72.18%

$500 or less

40.49%

30.99%

27.82% NO

$2,000-plus $1,000 – 2,000

7.39%

21.13%

BESPOKE SUITS

WATCH

More than five

8.80%

Two to five

16.55%

$100 – 499: 62.08% $500 – 999: 12.64%

One to two

None

22.54%

53.52%

PETS

$1,000-plus: 26.77%

HOW MANY TIMES HAVE YOU BEEN MARRIED?

None 43.80%

7.66%

Two

Never

1.82%

Cat 16.06% Dog 32.85% Both 7.30%

18.98%

Three or more times

71.53% Once

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FEATURES

ECONOMIC OUTLOOK

A LOOK AHEAD, A LOOK BACK Donald Horne sat down with three key portfolio managers to get their takes on 2016, and a look back at 2015

LOW INTEREST rates are forcing advisors to look high and low for vehicles that offer maximum yield. In November three experts weighed in on where the opportunities can be found: portfolio managers Sergei Strigo of Amundi Asset Management, a sub advisor for the Excel High Income Fund; Martin Murenbeeld of Dundee Capital Markets; and Lieh Wang of Empire Life Investments.

Strigo: Global interest rates are currently at very low levels, even though we expect the US Federal Reserve to hike interest rates in the near future. However, we do expect the absolute level rates to remain low or go even lower in the rest of the developed world.

In this environment, within the fixed income space, there are very few opportunities for investors to get any kind of meaningful yield; but emerging markets do provide opportunities for high yields The dollar denominated bonds, we

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are at over 5.5% in terms of yield on the main indices (JP Morgan), and if you go to local currency bonds, that becomes much more interesting, with around 7% yield (JP Morgan). If you look at countries such as Russia, Brazil or Turkey, you can have double-digit yields of more than 10%.

Murenbeeld: Advisors will take on more risk, and they’ll go into corporate debt.

Government debt is paying very little, and they’ll move up the risk curve, buying Italian or Spanish debt. But that’s not what I would recommend. I myself wouldn’t be inclined to lend governments too much money.

Wang: That has been the difficult question going back five years. Since the crisis, when the banks introduced emergency low interest rates, the traditional instruments for investments – like sovereign bonds – don’t give us much of a yield. The two obvious places to look would be one – in the fixedincome market, a step beyond the traditional

treasury and sovereign bonds and look at the corporate bond market, which would naturally have credit risks.

And if we really want to step out even further on the risk curve, something like high-yield bonds would be something to look at. But I wouldn’t make that a core part of the asset mix.

Secondly, we look towards stocks. The yield on the TSX currently is 3.1%, and that’s a significant increase from where the yield was 10 years ago. Correspondingly the five-year Government of Canada bonds dropped during that same time frame. I would say high quality blue chip stocks can look to add yield.

The US 10-year rate has decreased since June to about 2.1%. What’s the reaction in the market, and who is benefiting?

Murenbeeld: The Bank of Canada is not going to stand in the way of the equity market. That doesn’t mean it isn’t going to look at the market and say, ‘Oh gosh it’s weak, let’s raise rates.’ Whatever the Bank of Canada is going to do isn’t going to upset the equity market.

Wang: The question really speaks to whether the US Federal Reserve will finally start to normalize interest-rate policy and begin hiking interest rates from zero to 25 basis points. If they were to do that, then the whole yield curve may shift upwards, although it may flatten as well.

In Canada, we’re not close to following along, because our economy is weaker than

the US, and a lot of that has to do with oil prices collapsing in the last 12 months.

If you see the US hiking rates and the Bank of Canada remaining on hold, then we’ll likely see currencies move as a result.

The loonie will weaken versus the US dollar, and that will benefit Canadian companies that have revenue exposure to US markets.

We might also see some Canadian companies benefit from higher interest rates in the US – for example, Canadian life insurance companies such as Sun Life and Manulife, can be sensitive to rising rates and specifically to rising rates in the US. Canadian energy companies may get a bit of a tail wind in terms of sales, as oil is priced in US dollars. And then you have Canadian National or an auto parts company like Magna, that will likely benefit from the

Murenbeeld: It is likely to be under 4%, certainly for this year and 4% for next year.

There are institutions that put together different models for measuring growth, but we follow the International Monetary Fund’s (IMF) World Economic Outlook composition of world growth, and they are looking at something in the neighbourhood of 3.6% for next year, and 3.1% for next year.

The reason I mention 4% is that we have a chart on which we plot real commodity prices change year-over-year against world growth, and when that growth drops below 4% for a year, the real commodity price chart goes negative year-over-year. It is pretty consistent.

The average price of the two bundles we chart are down sharply in 2015 over 2014; of course depending on how much oil is in the

“The impact of the US interest-rate increases should be counterbalanced to some extent by opposite trends in other developed countries” Sergei Strigo, Amundi Asset Management, a sub advisor for the Excel High Income Fund currency differential.

Strigo: The fact they have actually decreased is beneficial for emerging market bonds, and we’ve seen a good performance in some of the emerging-market countries. If the Federal Reserve doesn’t hike interest rates sharply, we believe it will be supportive for emerging market debt.

Clearly the countries that will benefit the most from this low interest rate environment will be the countries under some macroeconomic imbalances, high levels of debt or potential refinancing issues, such as Turkey or South Africa.

What’s the forecast for global growth?

bundle, the decline would be even sharper.

Next year, if commodity prices stay where they are, you’ll have a year-over-year decline for next year.

The good news is, if we follow this simple model, commodity prices could increase a little – so long as it increases at a slow rate, so that the average would still be below the average of this year, but we actually have a very mild rising in commodity prices. And I am biased to that scenario, that we have hit bottom for most commodities.

What we’re recommending is that advisors carefully dollar-average into the commodity sector – not aggressively – just gently start to average. These sectors have been beat up terribly, but our models indicate there is

likely to be significant value in these sectors.

Strigo: Rates will go up – but the question is by how much and when. Chances are they will go up in December 2015 or next year.

We are forecasting a gradual increase in the US of 25 basis points. But in the rest of the developed world, we are seeing the opposite.

Interest rates are going to stay lower for much longer. The European Central Bank is talking about increasing its quantitative easing program beyond September 2016; the Bank of Japan will also have to do something similar, as Japan’s economy is not doing very well at the moment.

The impact of the US interest-rate increases should be counterbalanced to some extent by opposite trends in other developed countries.

Wang: Globally, I would expect interest rates to stay the same. In Europe and Japan, we are likely to see expanded QE programs that will act as a dampener on interest rates.

What about Nor th American economic growth?

Murenbeeld: Let’s start with the US. Our outlook for the US hasn’t changed a lot since we came out of the great recession.

We’ve been talking about – for the last five years at least – about a 2% to 2.5% kind of economy. It turns out the US economy has averaged 2.2% since then. There are a number of reasons why, and some of these are going to continue forward.

One reason is, the US dollar is too high, and that has two immediate effects – it boosts imports and reduce exports, and it tends to dampen business investment.

Fiscal policy has generally not been supportive of growth. You would, in a different environment, expect governments to have much larger deficits than they’ve had – the reason they don’t is that they’re already heavily in debt, and there’s a political demand that they not go further into debt on the Republican side.

The situation in Canada is to some degree similar. We’re a resource producer, much like Australia, so when commodity prices are down, the Canadian economy feels it quite

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FEATURES

ECONOMIC OUTLOOK severely – and the dollar declines. That kicks into action the manufacturing sector. The Canadian economy is a very dual economy – when resources are hot, the dollar is high and manufacturers are screaming; when resources are down, the dollar is down and

in Canada, back up to 1.8%.

What sectors are attractive for investment in Canada right now?

Murenbeeld: You have the three biggies – rocks, oils and banks are selling. Our models indicate they are on the attractive side. A

“Under NATO rules, each country is supposed to spend 2% of gross domestic product on defence – Canada hasn’t even been close to that” Martin Murenbeeld, Dundee Capital Markets manufacturers are happy again. That’s the shift you are seeing now.

While the dollar is low, the effects haven’t kicked in for eastern manufacturers. It takes a while for a low currency to kick in.

Supply systems have to be built – so we’re in this hiatus from the shift of resources to manufacturing.

The outlook is for a 1% economy this year.

The Bank of Canada is looking at something in the 2% range, perhaps lower. So we’ll probably see a 1.5% economy.

Wang: Regardless of whether the Fed decides to raise rates in December or early next year, I don’t think the long-term trend of interest rates has changed. Basically I’d expect interest rates in North America will stay lower for longer.

It doesn’t mean we shouldn’t expect some blips along the way, which we’ve seen from time to time.

We find ourselves in this lower-end environment. The 10-year US bond yield has decreased since June of this year, and is down from 12 months ago as well.

I would expect North American interest rates to be where they are now, perhaps a little higher. For 2016, in the US, I can see the 10-year getting back to 2.4% to 2.5%, and

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theme of ours for the last four or five years has been infrastructure. We need tremendous infrastructure renewal in North America.

There are some excellent reports by the Society of Civil Engineers about infrastructure and the stuff you don’t see, such as water systems and sewage systems.

These were all put in 50 years ago, and these need to be renewed – and we’ve been terrible at addressing this problem. For the simple reason that we’ve been obsessed with addressing the social system the past 40 years – we’ve been magnanimous with looking after everybody, whether they’re working or not.

The money has to come from somewhere, and where it comes from in Canada are defence and infrastructure. In the US, it’s from infrastructure.

Under NATO rules, each country is supposed to spend 2% of gross domestic product (GDP) on defence – Canada hasn’t even been close to that. I’m not hawkish, but this stuff has to be renewed.

On the US side it’s even more obvious – all you have to do is fly to La Guardia and say, ‘My God, I think I’ve landed in the Fourth World – not even the third world.’

Infrastructure needs to be done.

In the Depression, Hoover Dam was built – and that’s more than simply gussying up an airport. These are important projects. One could argue the US should build five or 10 nuclear generating facilities.

Wang: Energy companies are doing what they can to cut back capital spending, reducing or in some cases eliminating dividends altogether. They’re hunkering down to navigate through this lower-oilprice environment. So we look at the lowcost energy companies that can weather this lower commodity environment, so when prices do reverse back up again, they will obviously benefit and do quite well.

But until that time comes, it will be very choppy and very volatile. It’s paramount to keep a longer time frame for your investment horizon in that scenario.

The other opportunities that are attractive in Canada are Real Estate Investment Trusts (REITs). We’ve talked a lot about the lowerfor-longer interest rate environment. REITs, with their high dividend yields, are in very sound shape. They are good investments to have; slow and steady, and very predictable businesses, with stable and growing dividends. The industrial segment of the real estate market is strong, and despite the exit of Target, the retail sector is in good shape.

And don’t forget the Canadian banks!

They’ve underperformed this year, but valuations are attractive, and growing dividends every single year – and yields are north of 4%.

Strigo: Falling emerging currencies have obviously a negative effect on the performance of emerging market bonds, if they are denominated in the local currencies.

But we have to look more at the medium-tolong-term time horizon. Falling emergingmarket (EM) currencies will actually benefit these countries, because currencies act as an adjustment valve.

If there is a stress on the economy of a country, it should help to promote exports – and certainly Canada has benefited from that.

If you look at the rest of the world, everybody is trying to have a weaker currency.

From a macroeconomic perspective,

falling currency is not such a bad thing.

For the performance of fixed-income assets in emerging markets, clearly that hasn’t been that great. Local currency bonds have suffered, clearly because of that weakness – but for Canadian investors this fall in local bond valuations has been mitigated, as the Canadian dollar is moving in the same direction. When everything depreciates against the US dollar, Canadian investors are having better returns in Canadian dollars compared to the US. What do you think is the appropriate spread between EM bonds, and their US and European peers?

Strigo: There are 400 basis points difference on an index spread between emergingmarket countries and the US treasury (JP Morgan EMBIGD). These levels of spread are rather high compared to historical levels; so we think that going forward there’s some room for these spreads to compress 100 basis points or even more – but that will depend on the overall supportive risk environment and stable interest rates.

Wang: Actually, I’d rather talk about equity market valuations, not bond market spreads.

The S&P 500 in the US is trading at about an 18-times trailing P/E, and the TSX Index on the other hand trades at around 20 times trailing P/E. Historically, the TSX has traded at a premium to the S&P 500, mostly because the TSX Index has many more cyclical types of companies, so sometimes the TSX P/E is distorted because of that.

When I look at the historical valuation spread between the two markets, two multiple points is in line with the average. I don’t think the relative valuation is arguing for one market over the other. However, the better fundamentals of the US economy and the US dollar favour investing in US stocks over Canadian stocks.

Emerging markets – which ones should investors avoid, and which show promise?

Strigo: I believe today, the majority of emerging countries are in a better position to

withstand possible interest-rate hikes in the US comparing to past. The levels of foreignexchange reserves are close to the historical highs; the amount of foreign-currency debt is decreasing and total levels of public debt to GDP is significantly lower than in the developed countries; currencies are much more flexible than in the past.

The growth of emerging markets is actually a positive thing, as it adds liquidity and diversification. There are more countries issuing debt; there are countries in South America and Asia that have never issued debt before. So it’s making our universe more interesting and diversified.

The growth of debt has been more on the local currency side – it doesn’t have the same risks attached to it, as opposed to if these countries were issuing debt in US dollars.

generally speaking, they are a little more pro-business. Actually, they are one of the few countries the IMF believes will actually do better next year, and they continue to improve.

People tend to focus a lot on China, and they are missing the flowers beginning to grow in India. The population is just shy of China’s, and they are beginning to shift towards a more progressive, pro-business kind of climate. I have a small exposure to India.

Wang: When I look around the world, I still see the US as the best place to put money.

And a lot of that is explained by my outlook for currencies, and I think the US dollar will continue to strengthen.

When you mention emerging markets and the more volatile ones, like Russia and

“My preferred way of gettng exposure to these volatile, lessmature markets would be to invest in companies that have businesses in those countries” Lieh Wang, Empire Life Investments

On the corporate-debt side, there has been significant growth in emerging-market (EM) corporate debt, but if you look at the composition of that, a large part is from the government-owned enterprises, which arguably are safer compared to privately owned firms. And a lot of that is coming from China, which has the largest reserves in the world; more than $3.5 trillion US dollars. So we don’t think this increase of debt in EM countries is a big risk factor.

Murenbeeld: I’m partial to India. India is going in the right direction; I like the prime minister and I like the governor of the Bank of India – he is an ex-economist from the International Monetary Fund (IMF). I think

Brazil, we have very little direct investment in these EM markets – China included. My preferred way of getting exposure to these volatile, less-mature markets would be to invest in companies that have businesses in those countries.

For example, by investing in Manulife, they have a fast-growing Asian business; so we can get exposure to Japan, Indonesia, China through their subsidiaries.

Similarly, by investing in Scotiabank, we can get exposure indirectly to Latin America and to Asia, because the Bank of Nova Scotia is the most international of the Canadian banks. That is my preferred lower-risk way of investing in these emerging markets.

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PEOPLE

ADVISOR PROFILE

Going green As a certified financial planner, Ryan Colwell has found a way to turn a profit while saving the world at the same time

RYAN COLWELL joined the financial services industry out of necessity. His fiancée (now wife) was going back to school, and he needed a job to support the two of them – and, really, any job would do.

“I figured I’d pack boxes or drive a forklift; it was just a one-year thing,” Colwell says. “But an advisor at Financial Concept Group hired me as a marketing assistant – I didn’t know what an RRSP stood for at the time!”

Colwell was paid enough to support his small family, and he figured he could keep it up for just one year, even if that meant taking the Canadian Securities course at the behest of his boss.

“It was the hardest course I had ever taken – and I loved it,” Colwell says. “So I haven’t really left the industry.”

Despite graduating from the University of Toronto with an arts degree, Colwell was always good at math and saving money.

“That was the kind of thing I was predisposed to, and the course was just formal training,” he says. “I had closed my mind to those things because I was focused on the arts.”

Now, as a certified financial planner, Colwell has stayed in the business because of his passion for the industry – but the lifestyle it affords him and his family certainly helps, too.

Improving technology means Colwell can work from almost anywhere, giving him the flexibility to travel with his family. Two years ago, he took a two-month vacation across Canada with his wife and two sons, keeping his business thriving with a cell phone, a laptop and a portable printer.

“We worked along the way, whether we were in Dinosaur Provincial Park in Alberta or in Glacier

National Park in BC,” he says. “We were able to keep up with client requests and even have some client meetings along the way.”

Social responsibility Colwell also appreciates that the business gives him the freedom to work with one of the charities he supports – especially since that do-good lifestyle also complements his work. Colwell is a member of the Responsible Investment Association. The association is made up of fund managers, pension managers, endowment funds and financial advisors who have an interest in socially responsible investing.

“If you could buy fair-trade coffee for the same price as Nabob, why wouldn’t you?” he says. “I see socially responsible investing as a substitute to traditional mutual funds with similar performance, risk and fees, with the extra bonus of doing good for the world.”

Colwell says the financials are always paramount when choosing a fund, be it a socially responsible one or otherwise. But socially responsible funds differ in that they exclude certain industries, such as weapons, tobacco and uranium.

Others won’t include porn, alcohol or oil companies.

These funds then choose the better of each category for the portfolio. For instance, he says some funds might invest in Suncor – a company that accepts climate change and is working toward reducing its carbon footprint – but might not invest in Exxon, which helped fund the campaign to debunk the science of climate change.

“The most exciting part is what many socially responsible funds do is, after they’ve built their

“I see socially responsible investing as a substitute to traditional mutual funds … with the extra bonus of doing good for the world”

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FOLLOW HIS CARBON-FREE FOOTPRINT Ryan Colwell doesn’t just talk the talk, he walks the walk, saving money by going green. Here are a few ways you can do the same:

BIKE TO WORK Average annual cost to drive to work: $9,122 Average annual cost to ride a bike to work: $0 DRIVE A HYBRID Average cost of a car: $31,650 (Lexus CT) Average cost of a hybrid car: $28,300 (Lexus CT hybrid) INSTALL SOLAR PANELS Average annual cost of energy: $4,434 Average annual energy payout after an average $35,000 installation of 30 solar panels: $6,696.70 portfolios – no weapons, no nukes, no smoking and often no oil – they will actively engage those companies whose shares they do own and try to push them toward being even more progressive in their sector,” Colwell says. “They can also file shareholder resolutions to force issues onto the agendas of annual general meetings – and all the while you’re profiting from the gains.”

The idea that a socially responsible investment can also be a profitable one is hard for some people to grasp, but Colwell often pulls out a quote about the importance of buying local, taking the bus and being a vegetarian. While most people guess the quote is from an environmental book, it’s actually from Financial Planning for Dummies.

“I actually bought this book the day I got hired – that’s not where my training ended; I have a CFP now,” he says. “But I kept the book for that page. I think it’s perfect … and it perfectly sums up what my practice is about – doing good and saving or making money at the same time.”

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SPECIAL PROMOTIONAL FEATURE

CHARITABLE GIVING

BECOMING A PART OF THE GIVING CONVERSATION Philanthropy may not be top of mind when reaching out to your clients, but the benefits of having meaningful discussions about charitable giving are tangible HIGH-NET-WORTH CLIENTS face a cacophony of charities all clamouring for donation dollars – dollars they could be investing instead of giving away. But this should be seen as an opportunity, not an inconvenience.

Your clients are already predisposed to donate to charities, so advisors should position themselves in a role of guiding

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clients to give wisely and effectively – and by doing so, nurture a sense of trust and familiarity that can lead to deeper bonds with the client’s family and friends down the road. “[High-net-worth] individuals who have philanthropic conversations with an advisor find them useful and highly satisfying; however, deep discussions are seldom

taking place,” says John Hallward, chairman of The GIV3 Foundation. “Interestingly, affluent individuals believe that having these conversations can help strengthen their relationship with their advisor.”

A November 2014 study conducted by Ipsos Canada in partnership with BMO Private Banking, the Canadian Association of Gift Planners, The GIV3 Foundation

INCIDENCE (%) OF TAX FILERS CLAIMING A DONATION RECEIPT

30

1990

28 1994

26

1997 24 2004 2009

22

2013

1990 and Philanthropic Foundations Canada, revealed a majority of these affluent clients are interested in having such conversations with advisors.

According to Hilary Pearson, president of Philanthropic Foundations Canada, there’s an opportunity for financial advisors to have a significant impact on the charitable sector.

“Canadians are likely to inherit very considerable legacies over the next 20 years as the Baby Boom generation moves into their ’60s,” she says. “If even a fraction of

2013

“The incidence of charitable giving has been steadily declining for the past 30 years, and financial advisors could make a big difference in helping turn that around” Ruth MacKenzie, Canadian Association of Gift Planners

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SPECIAL PROMOTIONAL FEATURE

CHARITABLE GIVING “The research shows that if you talk to your client about their values and charitable giving, you actually build a stronger relationship. That can lead your client to recommend you to family, friends and colleagues” John Hallward, The GIV3 Foundation this inheritance is directed towards philanthropy, as it is likely to be, we will see a major increase in the need for knowledge about philanthropy and effective giving.”

Ruth MacKenzie, executive director of the Canadian Association of Gift Planners, an association that works with both financial advisors and charitable fundraisers, believes

DON’T BE BLIND TO THE SIGNS Are you missing the signs that your client is ready to talk about charitable giving?

“When there is money in motion, that is an obvious time to open the conversation,” says Jo-Anne Ryan of TD Wealth and the Private Giving Foundation. “So if somebody has passed away, then there is an inheritance, or the sale of a company, and the client owns shares in that company.”

But if even without such an obvious impetus, there are avenues to open that conversation.

“If none of those things are happening, then it should be part of the broader financial plan,” Ryan says. “What kind of a legacy do you want to leave? What do you attribute to your success, and how do you want to give back?”

Whether you see any of these signs, it’s a good idea to open up a charitable conversation with your clients, says Scotia Private Client Group’s Malcolm Burrows. Clients may not realize an advisor can help them identify strategies and resources to achieve their philanthropic goals.

“Not only will your clients feel more satisfied about their giving, knowing that their planning will further help the causes and charities they care about, but they will also appreciate your help and advice,” Burrows says.

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increased involvement by financial advisors will benefit not only those advisors and their clients, but also the causes and charities doing essential work in communities across Canada.

“The incidence of charitable giving has been steadily declining for the past 30 years, and financial advisors could make a big difference in helping turn that around,” she says. “Everybody wins, but for advisors in particular, there’s a clear business case – talking about philanthropy will strengthen and deepen relationships with their clients.”

Does more giving mean a decline in assets under management?

Hallward acknowledges, for some advisors there’s a fear money donated is money lost – in other words, if advisors help their clients give away money, there’ll be fewer assets under management. But the research proves that’s only part of the story, he says.

“The research shows that if you talk to your client about their values and charitable giving, you actually build a stronger relationship,” Hallward says. “That can lead your client to recommend you to family, friends and colleagues.”

Many advisors report they’re already having these conversations. But most wealthy individuals say their philanthropic conversations are cursory in nature, rather than deep, meaningful discussions. To affluent Canadians, philanthropy is about much more than just tax reduction. Like many financial decisions, charitable giving

often comes from a place of emotion. So advisors should frame the conversation around the emotional aspects of giving, such as the client’s values and personal passions about how to make a difference, rather than just the technical or tax implications.

“Don’t just talk to them about tax savings – frankly, that misses the boat,” Hallward says. “These people want to discuss how they and their family can make a difference,

strengthen the bond between advisor and client in a way that ordinary investment advice can’t. And, he adds, it’s not hard to start that dialogue, as the majority of high-net-worth clients are already predisposed to share the wealth.

“It’s pretty simple. If you can enable somebody to transform something, create an impact or fulfil a mission bigger than themselves – to help people or animals that they may never meet – it’s more powerful

“Canadians are likely to inherit very considerable legacies over the next 20 years …

If even a fraction of this inheritance is directed towards philanthropy … we will see a major increase in the need for knowledge about philanthropy and effective giving” Hilary Pearson, Philanthropic Foundations Canada so the conversation is really about values, having an impact and giving back; that’s what we need financial advisors to appreciate.”

According to Malcolm Burrows, head of philanthropic advisory services at Scotia Private Client Group, there can be significant benefits for advisors willing to bring up the philanthropic conversation.

“When they first broach the subject, some advisors are amazed at how open and interested clients are to talk about their personal values,” says Burrows. “Some of their most meaningful conversations are about how and where clients can make an impact by putting their charitable dollars to work.”

Malcolm Berry, vice president of major gifts for the SickKids Foundation, says a conversation about charitable giving can

than simply making a gift or the tax benefits that come from it,” Berry says.

When the client conversation shifts beyond the technical issues around investing and tax reduction, to connecting about a client’s charitable aspirations, there is a real opportunity to strengthen the relationship. And, Berry says, this not only helps your clients make a difference where it most matters to them, but it also makes good financial sense.

Shared experience and the direct approach According to Jo-Anne Ryan, vice president of philanthropic advisory services at TD Wealth and the executive director of the Private Giving Foundation, the advisors who are most successful in incorporating philanthropy in their discussions are the

ones who are involved in charitable causes themselves.

“They can talk about their own volunteer work and other charitable interests as a way of opening up to clients,” Ryan says.

But for advisors who aren’t active in philanthropy, there’s always the direct approach.

“Another way is to just ask, ‘What do you plan to do with your money?’” says Marvi Ricker, vice president and managing director of philanthropic services at BMO Private Banking. “Beyond the basic needs that people have for housing, education of their children and general lifestyle, many of our clients will have excess money. Some have very definite plans as to how they want to spend it, [while] others haven’t really given it much thought.”

However you choose to start the conversation, the evidence points to the clear benefits of doing so. Ricker says that proactively engaging clients in a dialogue on charitable giving can pay dividends for your relationship as you help them realize their philanthropic goals while also achieving their financial and personal objectives.

LEARN MORE For more information about talking to your clients about charitable giving, consult these philanthropy resources: Canadian Association of Gift Planners www.cagp-acpdp.org The GIV3 Foundation www.giv3.ca Philanthropic Foundations Canada www.pfc.ca Imagine Canada www.imaginecanada.ca

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PEOPLE

CAREER PATH

BEATING THE ODDS

Despite being a young single mother, Julia Chung became a successful financial planner and a dedicated entrepreneur 2015

LAUNCHES HER OWN PRACTICE UNDER JYC FINANCIAL When she and Facet amicably separated in 2015, Chung continued serving her clients through JYC Financial. But picking up with JYC wasn’t easy, so Chung hired a virtual assistant to help with the administrative side of the business. Wanting to help other small-business owners, many of them clients, Chung started Admin Slayer. It provides virtual-assistant services to small businesses “I had laid a foundation with Facet, and I’ve got wonderful clients who rely on me. I would feel terrible if I couldn’t continue that platform for them”

2007

GETS CAUGHT IN A BIDDING WAR When Chung decided she was ready for a change, she found competing bidders in BMO Nesbitt Burns and Raymond James.

She tested the waters at BMO, but ultimately decided to join Raymond James, where she was introduced to estate planning.

Her dedication to clients was apparent. After working with one client’s accounting partners, she decided in 2012 to join them and start Facet Advisors Wealth Strategies, a fee-for-service firm.

“I got a beginner’s course in financial planning with Investors Group, learned a lot about life insurance with Coast Capital, and then brought those two together with Raymond James and got a lot better at both”

1999

MOVES TO WHITE ROCK, BC When Chung moved to White Rock, the 45-minute commute to TAL’s Vancouver office made it difficult to see her son. So she decided to join Goepel McDermid, which later became Raymond James. That same year, Chung and five other women started Las Rebels Concert Promotion & Production. The firm helped independent musicians tour throughout the West Coast “Music and art was a really big part of my personal sense of fulfilment. We made absolutely no money, but I had lots of fun” Julia Chung originally intended on pursuing an arts career, but she instead headed to Pittman Business School for a business administration certificate “I had this wonderful surprise that I was pregnant much earlier than expected, and I thought I should do something that will get me a paying job”

2013

BECOMES THE BUSINESS EDITOR FOR THE GAZETTE

A few years ago, Chung married her love for financial services and her passion for the arts in the form of a writing gig with The Gazette “I’ve always been a writer. It’s always been something I did just for fun … I love the business side of writing”

2001

JOINS INVESTORS GROUP In 2001, Chung was recruited by Investors Group (IG), where she was introduced to financial planning. While at IG, Chung also helped a friend start Vida Coffee, which imported Mexican coffee beans. Her experience in that endeavour certainly came in handy when she joined what would become Coast Capital Savings. While there, Chung was tasked with amalgamating three life insurance credit unions “That was another enlightening and fascinating experience. I learned how to build a great team”

1997 JOINS TAL GLOBAL ASSET MANAGEMENT

1995

Chung found work at TAL Global Asset Management, and her love for financial services bloomed. The company provided her with the opportunity to further her education without taking time off work – something that, as a young mother, Chung certainly appreciated

GRADUATES FROM PITTMAN BUSINESS COLLEGE

“They encouraged me to go deeper into the industry. So I took the Canadian Securities Course, thanks to their encouragement, and found I really enjoyed it” www.wealthprofessional.ca

47

PEOPLE

OTHER LIFE

TELL US ABOUT YOUR OTHER LIFE E-mail wealthprofessional@kmimedia.ca

ON THE INSIDE

Advisor Lewis Chan helps inmates plan their futures for when they’re released HIS CLIENTS, according to financial advisor Lewis Chan, have a lot in common with prison inmates. No offense intended. While clients look to improve their spending and savings habits, inmates are seeking a similar but deeper improvement. As an associate with the Financial Literacy Counsel, Chan helps educate Vancouverites about their financial options. He focuses mainly on high-school and university students. Now Chan’s directing his financial education work at the prison system.

“As a prisoner, you have to plan what you’ll do upon release – without having access to materials or the internet,” says Chan. He has volunteered as a chaplain at the federal prison in Mission, BC, since 2011. “It might mean encouraging [inmates] to change lifestyle habits or attitudes so they can get a parole hearing or day visits ...

Now that some of the people we’ve been servicing in the prison have been in halfway homes or released ... we’ve been discussing giving them some planning so they can prepare to make that transition when they leave.”

490

The total number of beds at the Mission Institution

Mission

48

9

The number of holes on the community golf course once located on prison grounds n

Institutio

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36,426

The population of Mission, BC, where the prison is located

It’s time to reframe the value of financial advice How much is financial advice worth? At Vanguard, we decided to do the math. Our research discovered that financial advisors can add about 3% in net returns for investors through seven dimensions of advice —including asset allocation, low-cost investing, behavioural coaching and more. So the next time someone asks about the value of financial advice, you’ll know the answer.

Read the detailed report at vanguardcanada.ca/advisorsalpha

© 2015 Vanguard Investments Canada Inc. All rights reserved.

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