Wealth Professional 3.06

EMERGING MARKETS WHICH ONES ARE BEST FOR INVESTORS? GIVING BACK ADVISORS STEP UP TO HELP LOW-INCOME CANADIANS WWW.WEALTHPROFESSIONAL.CA ISSUE 3.6 | $6.95

DSCS AND SEG FUNDS THE SEARCH FOR ALTERNATIVES IN A CRM2 WORLD

BIG IDEAS

THE 8 TRENDS THAT ARE SHAPING THE FINANCIAL ADVISORY INDUSTRY IN 2015

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EXCHANGE OFFER AND CASH OPTION Deadline: Prior to 5:00 p.m. (Toronto time) on June 18, 2015. CDS participants may have earlier deadlines.

IF YOU OWN SECURITIES OF ANY OF THE FOLLOWING ISSUERS, YOU ARE INVITED TO EXCHANGE THOSE SECURITIES FOR UNITS OF GLOBAL REAL ESTATE DIVIDEND GROWERS CORP. Global Real Estate Dividend Growers Corp. (the “Fund”) is offering shares of the Fund to investors at a price of $10.00 per share in exchange for the securities of any of the issuers listed here or for cash subscriptions.

Prospective purchasers under the exchange option will be required to deposit their exchange eligible securities prior to 5:00 p.m. (Toronto time) on June 18, 2015 in the manner described in the preliminary prospectus of the Fund dated May 27, 2015.

The Fund’s investment objectives are to provide holders of units with:

OFFICE REAL ESTATE Allied Properties REIT Artis REIT Boston Properties Inc.

BOX.UN Dream Office REIT CUF.UN Inovalis REIT DRG.UN Slate Office REIT

D.UN INO.UN SOT.UN

AVB Canadian Apartment Properties REIT BEI.UN Equity Residential

CAR.UN Killam Properties Inc. EQR Milestone Apartments REIT Northern Property REIT

KMP MST.UN NPR.UN

RESIDENTIAL REAL ESTATE AvalonBay Communities Inc. Boardwalk REIT

HEALTHCARE REAL ESTATE Chartwell Retirement Residences Extendicare Inc.

CSH.UN Health Care REIT Inc. EXE Medical Properties Trust Inc.

HCN NorthWest Healthcare Properties REIT NWH.UN MPW Ventas Inc. VTR

INDUSTRIAL REAL ESTATE Dream Industrial REIT Granite REIT

DIR.UN Prologis Inc. GRT.UN Public Storage

PLD Pure Industrial Real Estate Trust PSA WPT Industrial REIT

AAR.UN WIR.U

LEISURE REAL ESTATE

(i) stable monthly cash distributions and to grow distributions over time, and

American Hotel Income Properties REIT LP

(ii) enhanced long-term total return through capital appreciation of the Fund’s investment portfolio,

Calloway REIT Crombie REIT

through an investment strategy which focuses primarily on investing in securities of issuers operating in the global real estate sector and related industries and that have exhibited sustainable dividend growth.

Agellan Commercial REIT American Tower Corp.

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

AP.UN Brookfield Canada Office Properties AX.UN Cominar REIT BXP Dream Global REIT

Host Hotels & Resorts Inc. HOT.UN InnVest REIT

HST Starwood Property Trust Inc. INN.UN

CWT.UN General Growth Properties Inc. CRR.UN Plaza Retail REIT

GGP Retrocom REIT PLZ.UN RioCan REIT Simon Property Group Inc.

STWD

RETAIL REAL ESTATE

DIVERSIFIED & OTHER REAL ESTATE

FINANCIALS Bank of Montreal Bank of Nova Scotia Canadian Imperial Bank of Commerce

ACR.UN Brookfield Property Partners LP AMT Canadian REIT Corrections Corp of America BMO Great-West Lifeco Inc. BNS National Bank of Canada CM Power Financial Corp.

RMM.UN REI.UN SPG

BPY.UN Crown Castle International Corp.

REF.UN First Capital Realty Inc. CXW H&R REIT

CCI FCR HR.UN

GWO Royal Bank of Canada NA Sun Life Financial Inc. PWF Toronto-Dominion Bank

RY SLF TD

FUNDS Financial Select Sector SPDR Fund iShares Core S&P 500 Index ETF (CAD-Hedged) PREFERRED SECURITIES Artis REIT Artis REIT BCE Inc BCE Inc. Brookfield Asset Management Inc. Canaccord Genuity Group Inc. Canaccord Genuity Group Inc. Capital Power Corp.

Enbridge Inc. Enbridge Inc. Enbridge Inc.

XLF iShares Global Real Estate Index ETF iShares S&P/TSX 60 Index ETF XSP iShares S&P/TSX Capped Financials Index ETF AX.PR.A AX.PR.E BCE.PR.M BCE.PR.K BAM.PR.X CF.PR.A CF.PR.C CPX.PR.A ENB.PR.F ENB.PR.H ENB.PR.B

Enbridge Inc. Enbridge Inc. Fairfax Financial Holdings Ltd. Fairfax Financial Holdings Ltd. Fortis Inc/Canada Fortis Inc/Canada GMP Capital Inc. Great-West Lifeco Inc. Husky Energy Inc. Intact Financial Corp.

Manulife Financial Corp.

CGR iShares S&P/TSX Capped REIT Index ETF XIU iShares US Financials ETF iShares US Real Estate ETF XFN SPDR S&P 500 ETF Trust ENB.PR.T ENB.PR.Y FFH.PR.E FFH.PR.G FTS.PR.H FTS.PR.K GMP.PR.B GWO.PR.N HSE.PR.A IFC.PR.A MFC.PR.F

Northland Power Inc. Pembina Pipeline Corp.

Power Financial Corp.

RioCan REIT RioCan REIT Shaw Communications Inc. Sun Life Financial Inc. Sun Life Financial Inc. TransAlta Corp.

TransCanada Corp.

TransCanada Corp.

Veresen Inc.

XRE IYF IYR SPY

NPI.PR.A PPL.PR.A PWF.PR.P REI.PR.A REI.PR.C SJR.PR.A SLF.PR.G SLF.PR.H TA.PR.H TRP.PR.B TRP.PR.C VSN.PR.A

(L to R) JEREMY BRASSEUR, Managing Director, NANCY THAM, Managing Director, Sales and Marketing, ANDY NASR, Managing Director and Senior Portfolio Manager, DEAN ORRICO, President and Chief Investment Officer, ROB LAUZON, Managing Director and Deputy Chief Investment Officer, DENNIS DA SILVA, Managing Director and Senior Portfolio Manager, MIKE BURY, Executive Director and Portfolio Manager, and MATT WATSON, Executive Director, Investments

To learn more about Global Real Estate Dividend Growers Corp., speak with your financial advisor or contact us at: 1-888-890-1868 invest@middlefield.com www.middlefield.com

First Canadian Place 58th Floor, P.O. Box 192 Toronto, Ontario M5X 1A6

A preliminary prospectus containing important information relating to these securities has been filed with securities commissions or similar authorities in each of the provinces of Canada. The preliminary prospectus is still subject to completion or amendment. Copies of the preliminary prospectus may be obtained from any of the agents named above using the contact information for such agent. There will not be any sale or any acceptance of an offer to buy the securities until a receipt for the final prospectus has been issued.

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Smart beta: An index methodology that uses alternative weighting and security selection criteria with the goal of outperforming a marketcapitalization-weighted benchmark, reducing portfolio risk, or both.*

Winner Best Smart Beta ETF Provider†

Invesco PowerShares Capital Management LLC

ETF Express Global Awards 2015

Smarter is better As Canada’s leading provider of smart beta, we believe all investors deserve a better way to access the markets. Our smart beta funds and ETFs go beyond traditional index investing. We focus on the drivers of growth and managing risk.

Speak to your sales representative or visit www.powershares.ca.

Connect with us:

* Smart beta exchange-traded funds (ETFs) may underperform cap-weighted benchmarks and/or increase the portfolio risk. † PowerShares Canada has partnered with Invesco PowerShares Capital Management LLC to offer a diverse lineup of smart beta strategies in Canada through ETFs listed and traded on TSX or through mutual funds. Commissions, management fees and expenses may all be associated with investments in mutual funds and ETFs. Trailing commissions may be associated with investments in mutual funds. Mutual funds and ETFs are not guaranteed, their values change frequently and past performance may not be repeated. There are risks involved with investing in ETFs and mutual funds. Please read the prospectus for a complete description of risks. Copies are available from Invesco Canada Ltd. at www.powershares.ca. Ordinary brokerage commissions apply to purchases and sales of ETF units. PowerShares Canada is a registered business name of Invesco Canada Ltd. This piece was produced by Invesco Canada Ltd. Invesco® and all associated trademarks are trademarks of Invesco Holding Company Limited, used under licence. PowerShares®, Leading the Intelligent ETF Revolution® and all associated trademarks are trademarks of Invesco PowerShares Capital Management LLC (Invesco PowerShares), used under licence. © Invesco Canada Ltd., 2015

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ISSUE 3.O6

CONNECT WITH US Got a story, suggestion or just want to find out some more information? twitter.com/wealth_proca

CONTENTS

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

UPFRONT 04 Editorial

The benefits of DSCs

FEATURES

34

MAKING CHARITY COUNT

24

New tax breaks will make charitable giving even more essential to your clients’ financial strategies

INDUSTRY ICON

20 Excel Funds’ Bhim Asdhir had the foresight to invest in India and China 20 years ago, and now he’s reaping the rewards

FEATURES

42

TEACHING A MAN TO FISH, FINANCIALLY

A new pilot program aims to use financial advisors’ knowledge to help low-income individuals build a financial foundation

5 strategies for mastering compliance

10 Statistics

A closer look at TFSA savings rates

12 News analysis

How CRM2 will affect ETF fees

14 Intelligence

This month’s big movers, shakers and new funds

18 Funds update

The appeal of segregated funds

FEATURES 50 Stress: the silent assassin

Learn how to keep stress from taking over your life

52 The brutal truth

Why your business needs accountability

PEOPLE 38 Advisor profile

For this father-and-son duo, the client relationship is paramount

55 Career path

PEOPLE

46

PORTFOLIO MANAGER

Lee Rosenbaum reveals how Loomis Sayles’ team approach has led to a thriving portfolio

2 www.wealthprofessional.ca

08 Opinion

Finding returns in the energy sector

TRENDING UP

PEOPLE

Can DSCs really help low-asset clients?

16 Alternative investment update

COVER STORY

WP takes a look at the trends that have already left a mark on the financial industry in 2015 – and reveals what you can expect over the next six months

06 Head to head

Cory Papineau of Assiniboine Credit Union is at the top of his game

56 Favourite things

Advisor Shawn Rutledge’s artistic side

WEALTHPROFESSIONAL.CA CHECK IT OUT ONLINE

IA CLARINGTON INVESTMENTS

Because we have choices for today’s markets.

Whether it’s income, risk management or capital growth, we’ve got solutions to help you meet your clients’ needs.

Talk to your IA Clarington representative, or go to www.iaclarington.com/whynow

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

The IA Clarington Funds are managed by IA Clarington Investments Inc. IA Clarington and the IA Clarington logo are trademarks of Industrial Alliance Insurance and Financial Services Inc. and are used under license.

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5/06/2015 9:22:05 AM

UPFRONT

EDITORIAL wealthprofessional.ca ISSUE 3.06

The push is on!

T

he push to sell DSCs ahead of full CRM2 implementation, that is. The buzz in the marketplace is really nothing more than conjecture, but a growing number of industry players – from IIROC vets to fee-based converts – are convinced it’s a bona fide phenomenon. Their thinking is well-reasoned enough: Embedded advisors will look to get as many of those front-end deals across the line before commission disclosure hampers the sales process. What clients will see post CRM2 implementation are the meagre trailers on DSCs. Ostensibly, the DSC commission earned now would, in fact, be excluded from the upcoming commission reports, since it would have been paid more than a year prior to the first report in 2017.

[DSCs] also have been lauded for preventing panic selling in times of economic upheaval. It’s hard to run for the exits with a fistful of DSCs in your pocket DSC detractors aren’t happy, arguing that an advisor charging 5% upfront will struggle to justify the costs. But that argument may be specious, say industry vets, who point to the groundbreaking role DSCs have had in protecting clients while winning them a financial plan they otherwise would have struggled to afford.

The benefits of DSCs don’t stop there. They’re often credited with keeping clients’ discretionary spending in check by making it harder for them to cash out, given their redemption penalties. They’ve also been lauded for preventing panic selling in times of economic upheaval. It’s hard to run for the exits with a fistful of DSCs in your pocket.

A collective ban on DSCs would permanently upset the apple carts of embedded commission advisors. It would effectively force the AUM fee model onto most embedded holdouts and limit client choice – especially for those with relatively small assets. For them, the DSC may be the best way to afford planning advice – not from a robot, but a human.

The Wealth Professional team

EDITORIAL Editorial Director Vernon Clement Jones Senior Writer Nicolas Heffernan Writers Will Ashworth Justin da Rosa Jordan Maxwell Donald Horne Executive Editor – Special Features Ryan Smith Copy Editor Clare Alexander

CONTRIBUTORS Timo Topp Stefan Kazakis

ART & PRODUCTION Design Manager Daniel Williams Designers Kat Vargas Joenel Salvador Production Manager Alicia Salvati Traffic Manager Kay Valdez

SALES & MARKETING National Accounts Manager Dane Taylor Associate Publisher Trevor Biggs General Manager, Sales John Mackenzie Marketing and Communications Claudine Ting Project Coordinator Jessica Duce

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

EDITORIAL INQUIRIES

vernon.jones@kmimedia.ca

SUBSCRIPTION INQUIRIES subscriptions@kmimedia.ca

ADVERTISING INQUIRIES dane.taylor@kmimedia.ca

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

Wealth Professional is part of a international family of B2B publications and websites for the finance and insurance industries INSURANCE BUSINESS CANADA john.mackenzie@kmimedia.ca T +1 416 644 874O

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

LIFE HEALTH PROFESSIONAL Correction: A story in WP 3.05 erroneously reported that CI Financial Corp. formed Assante Corp. CI in fact acquired the company in 2004.

tristan.cater@kmimedia.ca T +1 416 644 874O Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as WP magazine can accept no responsibility for loss

4

www.wealthprofessional.ca

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5/06/2015 9:22:51 AM

IA CLARINGTON FLOATING RATE INCOME FUND

Because income is playing hard to get.

Senior loans can help you find that income. They have minimal interest-rate sensitivity and can provide a relatively stable yield.

Floating rate funds focus on senior loans, and while they’re somewhat new to Canadians, Jeff Sujitno has 15 years’ experience with this asset class. As portfolio manager of the IA Clarington Floating Rate Income Fund, he aims to provide: A stable, more predictable income stream.

Protection against interest-rate risk.

Careful evaluation of credit risk.

Talk to your IA Clarington representative, or go to www.iaclarington.com/whynow

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

The IA Clarington Funds are managed by IA Clarington Investments Inc. IA Clarington and the IA Clarington logo are trademarks of Industrial Alliance Insurance and Financial Services Inc. and are used under license.

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5/06/2015 9:23:01 AM

UPFRONT

HEAD TO HEAD

Are DSC funds a solution for low-asset clients?

The battle over whether DSC funds can allow for holistic advice continues in the ramp-up to full CRM2 implementation

Ken MacCoy

Dave Watson

Owner RitePartner Financial Services

Founding partner The Wealth Planning Group

“It doesn’t matter how advisors are paid ... as long as there is ‘full disclosure’ and the client understands what it costs them. There are a lot of people who like to do their own thing and invest in the stock market and trade, but those are the ones who lose the money.

Advisors need to put clients first and make a united stand to advocate for the client’s right to choose. If not, then Canadian investors are sure to suffer when the regulators do make their decision. The squeaky wheel gets the grease. In other words, it is easier to stop regulation than reverse it.”

“When running a practice with multiple employees and offices, overhead is a real problem. Having some DSC revenue allows the cash flow to fund such practices. The client is well-served with access to quality service and advice.

Without the ability to generate cash flow, we may lose these offices, and that will not be a service to clients. These changes give the banks the strategic advantage over the independent advisor.

A lot of great advisors require these revenue sources to keep the lights on and service their clients.”

Jason Pereira

Financial planner IPC Investment Corp.

“DSC commissions cost the client money, and acting like they don’t is just wrong. DSC payments are funded by fund companies that either use their own capital or debt to cover the costs.

They are then recouped, along with the carrying costs, by way of higher MERs and DSC charges to those who are redeeming, more often the latter.

Where old models disappear, new ones pop up to meet the needs of the same market. Anyone in that market shouldn’t be sitting around complaining about the change, but instead figuring out new ways to more efficiently and profitably offer services those clients need without the use of DSCs.”

BEHIND THE DEBATE Rank-and-file advisors continue to defend DSC funds as the best way for average Canadians to get good, holistic advice. Proponents of DSC funds argue that the fees earned by the dealer/advisor at the beginning of a client relationship allow advisors to provide comprehensive financial planning to clients – advice clients likely wouldn’t receive otherwise, either because it isn’t worth the advisor’s time or the client simply can’t or won’t pay an upfront fee.

6

www.wealthprofessional.ca

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5/06/2015 9:26:31 AM

UPFRONT

IA CLARINGTON STRATEGIC INCOME FUND

Because income isn’t the only desired outcome.

With interest rates at historic lows and volatile equity markets, many are struggling to secure stable, reliable income while minimizing risk and still growing capital.

As portfolio manager of the IA Clarington Strategic Income Fund, Dan Bastasic has focused on finding income and growth with an emphasis on protecting capital. The Fund: Uses non-traditional asset classes in pursuit of income & capital gains

as flexibility in H asset allocation to find the right mix for income and growth.

Aims to provide capital protection for your clients’ investments.

Talk to your IA Clarington representative, or go to www.iaclarington.com/whynow

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

The IA Clarington Funds are managed by IA Clarington Investments Inc. IA Clarington and the IA Clarington logo are trademarks of Industrial Alliance Insurance and Financial Services Inc. and are used under license. www.wealthprofessional.ca

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5/06/2015 9:26:38 AM

UPFRONT

OPINION

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

It’s all about compliance Compliance issues have become more important than ever, so advisors neglect them at their peril, writes Farhan Hamidani HELPING PEOPLE make smart financial decisions, having a flexible work schedule and the rewards of running your own business – there are many reasons why being an advisor is the best job in the world. But compliance is a big part of the job, too, and it’s becoming increasingly more demanding. Keeping up-to-date in a constantly evolving regulatory environment is incredibly important, though it isn’t always easy – especially for advisors just starting out. Here are five strategies HollisWealth has adopted to ensure our advisors are compliant and poised for success:

has focused on converting day-to-day paperbased documents, files and processes to digital systems. This enables advisors to update information in real time, reducing the chance they’ll use a non-compliant or outdated form or procedure. Moving to a paperless office that is focused on ensuring all client interactions are

1. Continuous learning To ensure advisors are compliant, it’s important to give them the right tools. We’ve learned that approaching compliance from many different angles keeps everyone knowledgeable and prepared. For example, online training is invaluable when it comes to required education for busy professionals.

Having a variety of learning options, whether in-house courses or online programs provided by industry educators, is an absolute must in a dynamic regulatory environment.

But it shouldn’t stop there. Advisors need to augment learning by attending conferences, road shows and other face-to-face opportunities. We’ve found this approach deepens advisors’ understanding of compliance issues and reinforces what they’ve learned online.

documented and client is data secure will help keep advisors compliant.

2. Go digital Digital has become an indispensable part of our lives – and that’s no less true when it comes to compliance. For some time, HollisWealth

8

and actively participate in. But social media shouldn’t simply be a part of a marketing program; it needs to be seamlessly integrated into compliance and approval processes.

Advisors can stay compliant with their online communications by advancing their knowledge with courses on social media, accessing a library of pre-approved marketing communications and using a compliancemonitoring system to facilitate content creation. And, of course, a marketing team can be a strategic partner helping advisors establish and build a strong social media presence.

5. Be proactive The most successful advisors are proactive with clients – anticipating changing needs and priorities. When it comes to compliance, it’s a good idea to take a similar approach. By proactively using available resources both inside and outside of your organization, you’ll be able to stay current and provide clients with the best

“Keeping up to date in a constantly evolving regulatory environment is incredibly important, though it isn’t always easy”

3. Get support Advisors need to provide steady service to clients, and as such, require support in making changes to their business processes when new regulations are introduced or policies changed.

There have been a number of regulatory and policy changes in the last few years (such as CASL, CRM2 and FATCA), and we’ve provided support through advisor tools, operational resources, client communications and so forth to help advisors stay compliant and gain a strategic advantage in the marketplace.

4. Change is good Advisors’ marketing and business development strategies need to be fluid to ensure their practices continue to support building and maintaining effective relationships. Social media, for example, has become an essential tool that more advisors are beginning to notice

possible service. Internally, make certain you have a strong understanding of your firm’s risk management platform and its compliant practices, and focus on the security of client data. Externally, don’t forget to take a proactive approach to investor literacy to confirm your clients understand the rationale behind compliance. Plus, stay on top of reports, news and other information about compliance by frequently visiting sites like www.iiroc.ca or www.advocis.ca. The more you know, the better you can serve your clients.

Whether you are an established advisor or new to the industry, solid strategies like these can make sure you stay compliant and continue to provide your clients with the best possible service.

Farhan Hamidani, COO and managing director of HollisWealth, manages the firm’s ongoing daily business operations and sales, along with leading multiple national strategic initiatives and financials.

www.wealthprofessional.ca

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5/06/2015 9:27:57 AM

UPFRONT

IA CLARINGTON GLOBAL TACTICAL INCOME FUND

Because sometimes you need to get away.

Currency volatility, interest rates, oil prices, uncertain growth. They’re all good reasons to diversify globally.

The widely respected investment manager Loomis, Sayles & Company brings its distinctive style and strengths to the IA Clarington Global Tactical Income Fund: No constraints – just their best ideas.

Fixed-income used to seek stability and alpha.

Four portfolio managers with over 110 years combined experience.

Talk to your IA Clarington representative, or go to www.iaclarington.com/whynow

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

The IA Clarington Funds are managed by IA Clarington Investments Inc. IA Clarington and the IA Clarington logo are trademarks of Industrial Alliance Insurance and Financial Services Inc. and are used under license. www.wealthprofessional.ca

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5/06/2015 9:28:05 AM

UPFRONT

STATISTICS

Upping the savings game

NUMBER OF TFSA HOLDERS BY PROVINCE

The federal government has increased the deposit limits on TFSAs and lowered the minimum withdrawal percentage for RRIFs THE FEDERAL budget that passed in April was a boon for savers. The government increased the contribution room in TFSAs from $5,500 to $10,000. With more than 9 million account holders as of 2013, this could create huge savings for Canadians over the long term.

But how many Canadians actually need the extra room? Only 17% of TFSA holders maxed out their contribution room in 2013.

For some, that fact cancels out the need for the government’s move, which will cost $1.1 billion.

The Conservative government also made changes to RRIFs in the budget as well, attempting to quell seniors’ concern that they’re liquidating their RRIFs too quickly.

The new rules would force a person who turned 71 in 2014 to withdraw 5.28% of their assets from their RRIF annually, down from the 7.38% in the current rules.

Nearly a third of all Canadians have a TFSA, but Quebecers and Ontarians account for 62% of the total TFSAs in Canada. If BC and Alberta are included, the four provinces account for nearly 90% of the accounts in Canada.

British Columbia

1,430,360 Alberta

1,103,490 Saskatchewan

273,440

Manitoba

82%

$1.1 billion

Increase in annual TFSA contributions

Reduction in federal revenue over next four years because of the change

$120 billion

Total assets in TFSAs as of 2013

CAPITAL PRESERVED UNDER NEW RRIF FACTORS

Age

Assets remaining (new factors)

322,690

NUMBER OF TFSAs BY AGE GROUP

Since 1992, RRIF rules have forced seniors to withdraw 7.38% of the market value of their assets per year starting at age 71. Under the new rules, they would only have to withdraw 5.28%. Here’s a look at how it will affect Canadians: Assets remaining (existing factors)

$5,426

Average amount in TFSA

Difference (% more remaining)

71

$100,000

$100,000 –

80

$64,000

$77,000 20%

85

$47,000

$62,000 32%

90

$30,000

$44,000 47%

95

$15,000

$24,000 60%

100

$6,000

$10,000 67%

More than 9.5 million Canadians own a TFSA, but a breakdown by age group shows ownership is fairly even across all age groups except for Canadians under 20 2,000,000 1,500,000 1,000,000 500,000 94,220

1,414,120 1,430,680 1,508,250 1,858,560 1,634,750 1,656,280

0 Under 20 20-29 30-39 40-49 50-59 60-69 70-79

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www.wealthprofessional.ca

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Northwest Territories

9,830

United States

7,820

Nunavut

Outside Canada & US

3,190 3,820

Newfoundland & Labrador

91,860

Yukon

Prince Edward Island

27,130

8,890

Nova Scotia

206,010

New Brunswick

142,570 Total accounts

9,596,830

Quebec

2,013,560

Ontario

3,952,160

AVERAGE TFSA CONTRIBUTION BY AGE GROUP

AVERAGE UNUSED TFSA CONTRIBUTION ROOM

The average yearly TFSA contribution in Canada was $5,426. Perhaps unsurprisingly, there is a clear relationship between the amount contributed and age; the amount increases steadily as Canadians get older $8,000

On average, Canadians have $9,969 in unused space in their TFSA accounts.

Perhaps due to more expenses and less discretionary cash than younger and older Canadians, those in middle age have the most unused space $8,000

$6,000

$6,000

$4,000

$4,000

$2,000

$2,000 $2,991

$3,745

$4,252

$4,999

$5,864

$6,480

$6,826

$0

$6,006

$14,149

$13,425

$11,823

$9,480

$7,274

$5,390

Under 20 20-29

30-39

40-49

50-59

60-69

70-79

$0 Under 20 20-29

30-39

40-49

50-59

60-69

70-79

www.wealthprofessional.ca

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5/06/2015 9:28:46 AM

UPFRONT

NEWS ANALYSIS

MERs on ETFs? You betcha Fair is fair. Embedded commission advisors are suggesting fee-based players should ensure full disclosure on ETF MERs, as on mutual funds

THE OBLIGATION for fee-based advisors to fully disclose MERs on ETFs has been heightened, not lessened, with the impending regulations of CRM2.

“The fee-based structure gives clients a more transparent look at what is going on with a client’s account, but that doesn’t mean there aren’t hidden fees, especially when it comes to ETF funds and their MERs,” says AJ Chase, a wealth advisor with ScotiaMcLeod. “Many investors may not know about these hidden fees.

failing to disclose all the MERs associated with ETFs – costs that sometimes approach those of mutual funds.

“Also,” Chase says, “with a fee-based practice, an investor’s tax advisor might be able to write-off non-registered fees charged to each account.”

The advisor’s comments are part of the ongoing debate about whether fee-based compensation should be seen as a wholesale replacement for embedded commissions.

“Investors may think they are only paying a fee as a percentage agreed upon with their advisor, and not any additional embedded fees” AJ Chase, ScotiaMcLeod Investors may think they are only paying a fee as a percentage agreed upon with their advisor, and not any additional embedded fees.”

At a time when advisors on the embeddedcommission side are doing battle with fee-based advisors in attempt to justify their services, the shoe is now on the other foot, as fee-based advisors take heat for

12

The concern surrounding MERs may point to a lack of education on the part of clients, but it’s also indicative of a failure on the part of advisors to fully educate and inform their clients about hidden fees and other factors related to investment products. The reality, says one advisor, is the industry is undermining itself.

“At the end of the day, the industry is

its own worst enemy,” says Kathy Waite of Your Net Worth Manager. “It has taught clients advice is free. It should serve as a wake-up call for families that the company you are working with makes billions. If you don’t believe it, just look at the stock price.

Nothing is a charity – they’re not doing this for free.”

Once CRM2 is fully implemented, it will ostensibly eliminate some of the concerns around hidden MERs, more usually associated with mutual funds. But some advisors believe otherwise.

“The end-user client always pays for both the cost of advice and the cost of the products used to implement that advice,” says John DeGoey, a portfolio manager at Burgeonvest Bick Securities. “Telling clients only about the cost of advice is, in my opinion, only telling half the story.

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IS THE 1% MODEL FACING EXTINCTION? A recent conference of industry professionals suggests that the typical fee-based model may soon be a thing of the past – even as thousands of Canadian advisors move to adopt it.

“Financial planning is the ‘free toaster’ of the industry,” Bob Veres, publisher of Inside Information, told a packed house at the National Association of Personal Financial Advisors conference in San Diego this spring. “Within the next five years, I think you’ll see advisors migrating to something else.”

The “something else” is predicted to be a variation on the flat-fee model, where the advisor charges an hourly or annual fee no matter the assets under management or the growth in those assets. The 1% model is increasingly looking like it’s on the way out.

In 2014, an Investment News study found that 95% of financial advisors in the US set their fees based on assets under management.

However, fee-only advisors are increasingly turning to alternative compensation models such as retainers to reduce the emphasis on performance and focus more on holistic planning.

In that regard, regulators have massively dropped the ball.”

New transparency rules will open the eyes of investors unaware of what fees

“This is an opportunity to teach ordinary investors two lessons: Advice is not free, and the cost of investment products matters greatly. Drawing attention to one

“[The industry] has taught clients that advice is free. This should serve as a wakeup call for families that the company you are working with makes billions” Kathy Waite, Your Net Worth Manager they’re paying, argues DeGoey, but advisors could face two potential issues with ETFs and hidden MERs: They’ll have to justify charging higher advisory fees for individual securities and F-class funds.

while simultaneously ignoring the other is regrettable, to say the least.”

But some wonder if the new rules will go far enough to protect investors. The buzz across the industry is that advisors

have already been undertaking practices like selling segregated funds to sidestep disclosure rules.

“I think all costs should be disclosed up front and on statements,” Waite says.

“Performance should be measured against a benchmark. There should be a list of questions to ask on fund facts sheets or on the KYC document so that clients sign to say they asked those questions and were told.

“Often, advisors rush through the pile of paper, and then later, when clients complain they didn’t know about a DSC or something, they are told the advice is suitable based on the KYC and, ‘You signed to say you had been disclosed.’ It takes time to explain the different options, and as most advisors are commission or on sales quotas after a long appointment, I think corners get cut.”

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5/06/2015 9:30:11 AM

PRODUCTS

UPFRONT

INTELLIGENCE CORPORATE ACQUIRER

TARGET

FUNDS COMMENTS

Borrowell

N/A

Borrowell has rolled out a Canadian marketplace lending platform aimed at providing better alternatives to high-interest credit card rates and bank loans

Brookfield Property Partners LP

Centre Parcs UK

The asset manager has acquired the UK resort operator for $3.7 billion from Blackstone Group. Centre Parcs operates five short break destinations in the UK

DH Corporation

Fundtech

The TSX-listed financial tech company purchased one of the world’s leading global payments providers for $1.25 billion

Forum Equity Partners

Brookfield Infrastructure

The infrastructure investment firm has acquired the interests of Brookfield in a couple of BC justice buildings, one in partnership with Morguard Corporation

Kensington Venture Fund

N/A

Torstar and other investors participated in the second closing for the $193 million IT venture capital fund of funds that includes initial investors Richardson GMP

La Caisse de dépôt et placement du Québec

Southern Star Central

The Quebec pension fund has partnered with GE Energy’s financial services unit to buy the US natural gas pipeline

Riverside Company

Health & Safety Institute [HSI]

DW Healthcare Partners, a Toronto-based healthcare-focused private equity firm, sold the health and safety compliance firm to Riverside after almost three years of ownership

TD Bank

N/A

The bank announced it’s installing 250 ATMs in Ultramar Corner Store locations from Quebec eastward

CI plans trio of mergers

One of Canada’s largest asset management companies is merging three funds, the CI Alpine Growth Equity Fund, the CI US Equity Plus Fund and the Signature Diversified Yield Fund, into the CI Canadian Small/Mid Cap Fund, the Cambridge American Equity Corporate Class and the Signature Diversified Yield II Fund, respectively.

The mergers indirectly affect two segregated funds that currently invest in units of CI Alpine Growth Equity Fund. Following the mutual fund merger, the Clarica SF CI Alpine Growth Equity Fund and the Clarica SF Growth Fund will invest in units of the CI Canadian Small/Mid Cap Fund.

Horizons closes ETF

Goal-based robo-advisor enters the fray

Canada’s first goal-based online investment management service, Invisor.ca, has been officially launched. As impractical as it may sound, Invisor.ca purports to offer investors personalized online investment management at a fraction of the cost of a traditional financial advisor with no minimum investment amounts and a full, unbiased view of the market.

Invisor.ca says it considers a client’s goals and recommends a customized portfolio built using low-cost mutual funds and ETFs to help reach those goals.

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Continuing its pruning effort, the ETF provider announced it’s closing the Horizons Auspice Broad Commodity Index ETF. While no longer accepting direct subscriptions for units of the ETF, redemptions will be accepted until sometime in late June, at which time the ETF is expected to be de-listed from the Toronto Stock Exchange. Any remaining unitholders of the ETF will receive the net proceeds from the liquidation of the assets, less all liabilities and all expenses incurred in connection with the dissolution of the ETF, on a pro rata basis.

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5/06/2015 9:31:22 AM

PEOPLE

PEOPLE Caldwell closes fixedincome fund

Caldwell Investment Management, the manager and trustee of the Caldwell High Income Equity Fund, has announced its intention to terminate this fund the first week of July. Until then, the fund will be managed according to its current investment objectives and strategies.

Fund unitholders will continue to have the right to redeem or switch their holdings in the fund up to the close of trading on July 6. Caldwell will liquidate the holdings of the Fund at fair market value, determine distributions and distribute the net assets to unitholders’ accounts in accordance with the fund’s declaration of trust.

Counsel Portfolio Services looks to simplify

The Investment Planning Counsel subsidiary, which in turn is part of IGM Financial, announced a proposal to merge the Brigata Diversified Portfolio into the Counsel Regular Pay Portfolio. The investment objective of the surviving fund would be more heavily weighted toward fixed income, although equities would still represent more than half the overall holdings. Full details of the proposed merger will be outlined in the Management Information Circular and Proxy that was mailed to all investors of record in May. The merger is conditional upon regulatory and investor approval sometime in late June.

TD Emerald Funds get new custodian

TDAM, the asset management arm of the TD Bank and the manager of the TD Emerald Funds, announced that it has transferred the custodianship of eight of these funds from CIBC to CIBC Mellon, a joint venture between The Bank of New York Mellon and CIBC. As a result of this transfer, the rights and obligations of CIBC as custodian under the Amended and Restated Custodial Services Agreement, dated January 30, 2015, and the Sub-Custodial Services Agreement, dated January 1, 2006, have been assigned to CIBC Mellon Trust Company.

NAME

COMPANY

COMMENTS

Ben Bernanke

Pimco

Former Federal Reserve chairman Bernanke will become a special advisor to the company, in addition to his part-time gig with Citadel, a Chicago-based hedge fund

Michael Hanley

IA Financial Group

Hanley, a chartered accountant, former executive and current director, will join the 14-member board, one-third of which are women

Michael C. Lauzon

Laurentian Bank

Lauzon is retiring after serving as CFO since 2009. In his 16 years at Laurentian, Lauzon was seen as a key figure in getting the bank through the financial crises

David Linds

CIBC Mellon

Linds is retiring after 25-plus years with CIBC and CIBC Mellon; he has been with the joint-venture operation since it was launched in 1996, serving the past decade as head of sales operations

Dennis McCluskey

Bridging Finance

With 30 years of broad-based large corporate and commercial lending experience, McCluskey will help rapidly grow the company’s private debt portfolio

Richard Nesbitt

Global Risk Institute in Financial Services

Former banker and Bay Street fixture Nesbitt will become CEO of the financial services think tank

Douglas Nowers

Northern Trust Canada

Nowers will join the company’s board of directors; the industry vet has spent more than 25 years in the financial services arena, including time at the helm of CIBC Mellon

Sean O’Brien

CTL Corp.

O’Brien, the former head of automotive finance at TD Bank, will become the auto finance company’s COO, and will be responsible for day-to-day operations

Canaccord Genuity expands its investment banking operations

The Vancouver investment dealer has hired Jamie Brown as vice chairman of Canaccord Genuity Corp. and managing director of investment banking. Brown brings to the table years of experience on both sides of the border and will spend a great deal of his time boosting the firm’s presence in Western Canada. This is Brown’s second stint with the company – he first served for 16 years until leaving for a Toronto merchant bank in 2013. Brown will focus on banking relationships in the diversified industries, technology and life sciences sectors.

National Bank veteran inducted into Canadian Business Hall of Fame

National Bank has announced that André Bérard was inducted as a Companion of the Order of the Canadian Business Hall of Fame during the 37th annual gala dinner and induction ceremony held in Toronto. The event honours Canadian business leaders for their enduring contributions to the country’s economy and society. Bérard spent his entire career at the bank, rising to CEO in 1989 and staying in the top job for 14 years. The Companion of the Order of the Business Hall of Fame is the highest honour of its kind in Canadian business.

www.wealthprofessional.ca

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5/06/2015 9:31:27 AM

UPFRONT

ALTERNATIVE INVESTMENT UPDATE

Acclimating to new energy trends When it comes to investing in the energy industry, it’s all about embracing a new normal

international companies, companies doing business in the arctic, offshore Brazil or North America,” Lamarche says. “At the end of the day, they were all exposed commodities. This has changed.”

He sees advisors moving investors away from international oil companies, and instead focusing companies that are “in the heart of the large and low-cost oil fields.”

“I think there are going to be winners and losers as a result of this technological

“Oil prices are finding their new levels from what they used to be, and it’s confusing to investors”

The energy sector has been a hot one for investors lately, as volatile oil prices have drawn many into and out of the market. And while there is opportunity, there are certain things investors need to be wary of.

“I think investors have to be acclimatized to lower energy prices for longer, but they shouldn’t fear that because the cost associated with doing business in North America has come down just as much, if not more,” says Norm Lamarche, vice president and CFO of

NEWS BRIEFS

Front Street Capital. “The level of profitability for energy companies doing ... business in energy shale at $70 a barrel is what it used to be at $100 a barrel in the pre-shale business.”

According to Lamarche, investing in the energy sector has to change. Traditionally, investors would purchase shares when they thought the commodity was set to benefit from greater demand or supply issues.

“Investors would play that largely in a group, so you could play seniors, juniors,

Canaccord Genuity goes global on REITs

Full-service investment firm Cannacord Genuity has announced it’s adding a dedicated US REIT team based out of its existing offices in New York and San Francisco. The addition of US REIT expands the company’s REIT coverage to three continents: North America, Europe and Asia. With six senior analysts on the team, Canaccord Genuity is now able to provide expertise to its clients in the diversified commercial, industrial, office, residential, retail, healthcare, lodging and specialty real estate subsectors, while strengthening its position within the US mid-market.

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revolution that is taking place, and I think there are going to be a lot of losers,” Lamarche says. “It is very much energy-shale-specific and very much company-specific.”

For Lamarche, it’s all about adjusting expectations and evolving along with the ever-changing oil landscape.

“Oil prices are finding their new levels from what they used to be, and it’s confusing to investors. It’s confusing probably even to energy producers because the way it’s always been has now changed,” he says. “You’re now in a world where commodity prices are finding their new levels, and they’re going to be lower ... reflecting the marginal costs of delivering oil barrels or natural gas molecules to the marketplace.”

Investors gain access to Canadian oil pricing

Calgary-based Auspice Capital Advisors has delivered the first ETF in Canada to track the performance of the Canadian Crude Excess Return Index. It also plans to launch another ETF based on the price of Canadian natural gas. Auspice provides clients with a suite of liquid alternative investment strategies that can be tailored to suit different investors and are designed to improve risk-adjusted performance and provide non-correlated assets to the traditional equity and bond portfolio. The MER of the new fund will be 0.65%.

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Q&A

Hilliard MacBeth Portfolio manager Richardson GMP

Investments in the energy sector

Years in the industry 36

What opportunities are there to be had due to low oil prices?

Where should investors be looking for opportunities?

Investment strategy Leads a five-person team of professionals as they strive to help Canadians to achieve growth and balance in their investments and avoid ‘hot’ sectors where the ‘fast money’ crowd is focused

I think it’s really tough right now because what’s happened is since November, when OPEC changed the world, the price of oil dropped 40% to 50%, but the energy share prices, especially in Canada, dipped by a much smaller percentage. People have to be really careful if they do oil and gas/energy stocks right now because they haven’t reflected the full extent of the drop in the price of the commodity. It appears that what’s happening is there is still a pretty substantial expectation that the price will rebound.

And it has rebounded to around $60, so it’s not a totally unreasonable expectation. My opinion is it’s overdone.

What we’re buying is actually alternative energy.

We’re investing in things like equipment that’s used for solar energy, and we’re just contemplating some further investments in that area.

There is another one in wind energy I am looking at now. We haven’t bought it yet, but we’re thinking about getting into that.

Should we expect further declines in oil stocks before they go back up?

Yes, we should. There will be some companies that don’t make it, and there is a tendency for people to be able to put off the inevitable for a while, but more companies [will] discover that they can’t make it.

There will be a tremendous amount of mergers and acquisition activity, but I think the buyers are waiting. Not all of them – I’ve seen some deals go through where people are willing to step up now, but the majority are thinking they can buy a year from now when the assets are taken over by the lender … and they will get a better price.

Brookfield ramps up its investment activity

Canada’s largest alternative asset manager plans to start raising an additional $10 billion in funds in 2015 on top of the $11 billion already spent this year and the $15 billion it spent in 2014. CEO Bruce Flatt sees significant opportunity in the coming months by buying assets that are in out-of-favour markets or whose owners have amassed too much financial leverage.

In addition, the asset manager plans to target divisions of companies not related to the core business. Energy infrastructure and private equity are two very popular alternative investments.

Do you think there will be a move from investing in traditional energy into renewable energy?

There certainly is a tremendous amount of money going in. The Bank of Canada estimates that the investment in traditional oil and gas in 2015 is going to be down by 30%, which is very difficult for a lot of companies because there is a large number of smaller companies in the energy patch that are totally dependent on that new investment every year to keep drilling and keep their leases.

On the other hand, in the alternative energy space – wind, solar and other associated things – there is a tremendous increase in investment, so it makes it easier for those companies to access capital. A lot of the institutional money managers are perhaps being told by their committees that control their investment to put an allocation in the alternative energy space.

Power Financial looks to alternatives

Last month, the mutual fund company’s Mackenzie unit announced it had hired Michael Cooke as its senior vice president of alternative products, a sure sign that it was moving beyond its traditional battle ground. Cooke previously was the head of distribution for PowerShares Canada, Invesco’s ETF division north of the US border. Rumours abound that Mackenzie’s first move will be to establish actively managed ETFs and fan out from there. Currently, Horizons ETFs Management is the leader in active ETFs, with $2.5 billion invested in 28 funds.

Whitecap Venture Partners closes $70 million fund

Toronto-based Whitecap Venture Partners has raised $70 million for its tech venture capital fund, Whitecap III LP, from outside third-party investors, including Kensington Capital Partners, the Bank of Montreal and several wealthy Canadian families. Until recently, the family-owned firm had only invested its own money in technology opportunities; this move suggests there’s never been a better time to invest in Canadian venture capital.

The Diamond family, whose background is in real estate, will invest one-quarter of the committed capital for the new fund. www.wealthprofessional.ca

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5/06/2015 9:36:51 AM

UPFRONT

FUNDS UPDATE NEWS BRIEFS Sun Life launches new wealth management solution

With almost 5 million Canadians within 10 years of retirement, it’s become increasingly important for investors to be able to lock in market gains in order to reach their savings goals. Sun Life has introduced a series of guaranteed investment funds, a product that combines the upside of investment funds with a layer of protection to help safeguard against market volatility, providing the ability to meet the specific needs of clients during different life stages. The product lineup includes a guaranteed income product, a first in the Canadian market.

Fidelity Canada announces the arrival of Joel Tillinghast

Fidelity Canada has tapped veteran money manager Joel Tillinghast to manage its new Fidelity Global Intrinsic Value Class and Fidelity American Balanced funds. In a career that’s spanned more than 25 years, the award-winning manager has relied on bottom-up fundamental analysis and an intrinsic valuation methodology that allows him to identify superior businesses on a global basis. In the 12 months that ended March 31, 2015, 93% of the funds’ assets were ranked in the top two quartiles of mutual fund performance in Canada.

PowerShares Canada launches a trio of ETFs With the introduction of three new exchange-traded funds, PowerShares Canada has added to the diversity of its smart beta strategies. The Power Shares Low Volatility Portfolio ETF [PLV] is a first in Canada, employing global active management to create a

18

portfolio of equities and fixed-income securities that’s rebalanced monthly.

The other product unique to Canada is the PowerShares Global Shareholder Yield ETF [PSY], which invests in four existing PowerShares ETFs that focus on companies emphasizing the allocation of free cash flow through dividends and stock buybacks.

One of the big banks gets bigger RBC GAM, the asset management arm of the Royal Bank of Canada, announced the creation of two new investment solutions for its mutual fund offerings. The first solution is the corporate class version of its very popular RBC Balanced Growth & Income Fund, which has grown to almost $1 billion in less than two years. The second solution is a fully hedged, US dollar version of the BlueBay Global Convertible Bond Fund (Canada), which has grown to more than $1.2 billion in less than three years.

BMO gets busy with five new mutual funds BMO has launched five new mutual funds for the Canadian market. All tactical in nature, the funds provide investors with a choice of a balanced, global bond or global equity fund-ofETFs. While all five funds launched are actively managed, it’s the three fund-of-ETFs that will be of most interest to the wealth management industry in Canada. Structured as mutual funds that hold ETFs, these three new offerings provide investors the opportunity to blend active and passive management, effectively lowering the overall cost of the funds while accessing untapped asset classes to generate higher total returns for its investors.

CRM2 leads to influx of segregated funds Many financial advisors are offering insurance products in a bid to maximize commissions.

But how long can it last?

It appears more advisors are turning to segregated funds in a move to increase commissions once CRM2 regulations take effect, according to a new report from Investor Economics.

Overall net assets in segregated funds reached $113.1 billion as of March 2015, compared with $104.3 billion the previous March. In addition, a report by Desjardins Securities reveals that net sales of segregated funds reached $243 million in March 2015, the highest monthly tally since February 2012.

“I think it is a fair assumption that with CRM2 on the horizon, we may see more dually licensed advisors focusing on selling seg funds, but we don’t expect to see a massive shift,” says Julie Yoshikuni, VP of retail investment products and marketing for Empire Life. “It will become more complicated, particularly for advisors who have clients with both seg and mutual funds, to manage and explain the different fee disclosures to clients.”

ETFs are also an option – new information from the Australian Stock Exchange paints a very vibrant ETF scene down under that’s flourished under increased regulation and reform that’s similar to CRM2. While the data doesn’t specifically track the decline of mutual fund sales, analysts rightly point out that any increase in ETF sales has generally come at the expense of higher-MER mutual funds.

The phenomenon has Canadian advisors looking at the Australian story as writing on

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5/06/2015 9:37:49 AM

s

the wall for their move through the same sort of reform process.

Advisors are already jumping on the seg fund bandwagon in droves, believing them to be a good way to diversify client portfolios.

“Seg funds offer unique benefits that can play an important role in a diversified portfolio, which puts a dually licensed advisor in a good position to offer clients solutions

“Seg funds offer unique benefits that can play an important role in a diversified portfolio ...” to meet their needs,” Yoshikuni says. “Many investors want to participate in the growth of the markets, but they also want protection if markets head south.

“Seg funds offer peace of mind, with the maturity and death benefit guarantees to add protection in all markets,” she continues.

“Other unique benefits include estate planning and the ability to bypass probate, saving time and money.”

And while they are currently overlooked by regulators, Yoshikuni believes it’s only a matter of time until seg fund disclosures are more closely scrutinized.

“We expect that regulators will eventually follow suit with similar fee disclosure requirements on seg funds; we saw this on a smaller scale, but in reverse, with point-of-sale fund facts disclosure for segregated funds and then for mutual funds. However, based on history, the harmonization of fee disclosure is likely a few years away.”

Q&A

John DeGoey CFP, vice president and portfolio manager Burgeonvest Bick Securities

Years in the industry 22 Career highlight Inaugural recipient of Fellow of the Financial Planners Standards Council [FPSC] title

The appeal of ETFs in the wake of CRM2 How are advisors, including mutual fund advisors, warming up to offering ETFs? Especially within the context of CRM2, some advisors – still not many – are starting to realize that cost is a huge differentiator, especially in a low-return environment. So, since all product costs and advisor compensation will be required to be disclosed as of July 2016, there are a number of advisors who are transitioning away from funds and into ETFs, and passing their savings onto clients.

Typically an ETF, as compared to an F-class mutual fund in the same asset class, would be about 1% cheaper. So that’s a 1% return at net/net, all things being equal.

A smart-aleck advisor could say, “Let’s split the difference.

I’ll increase my fee by 50 basis points on a product that is 1% cheaper, and you’ll still be 50 basis points better off,” but I think the honourable advisors will keep their fees similar, and if they increase them at all, it will be modestly, maybe 10 basis points.

Most, if not all, of the savings will be passed onto clients. .

Low-MER mutual funds have seen real growth in answer to the rise of ETFs. How viable are they as a defense strategy for mutual fund advisors?

They’re better than nothing. Low-MER mutual funds still can’t compete with ETFs in terms of their price, so instead of being 100 basis points more expensive, they might be 60 basis points more expensive. To me, you should probably shrug and say, meh, at [a difference of] 10–20 basis points. But at 50 basis points, in my opinion, the difference in price is still material.

I suppose everyone has their own opinion about that, and we won’t really know until CRM2 kicks in and we find out for sure.

To my mind, a 50-basis-point differential is still an important differential, and you only become indifferent when the numbers are much smaller.

There are some concerns around ETFs that have higher MERs. Why do fee-based advisors need to ensure that they fully disclose MERs associated with ETFs? The short answer is that if you’re honourable, you have to make it clear to the client that the client is paying all the product cost and all the advice cost. So cost is always a consideration; you wouldn’t buy a car or a house without asking what it costs first. And next to houses and possibly cars, most people’s biggest expense in their entire lifetime is what they would pay for financial advice and products.

It’s a really, really important thing … people ought to be paying attention to what they pay for financial advice and products. And that is why CRM2 is important.

www.wealthprofessional.ca

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5/06/2015 9:38:02 AM

PEOPLE

INDUSTRY ICON

EMERGING AUTHORITY Over the past 20 years, Bhim Asdhir has created Canada’s most successful mutual fund company focused exclusively on emerging markets

INVESTING IS all about the numbers, but those who are successful at the game know which numbers are important and which ones to ignore.

Nearly 20 years ago, Bhim Asdhir recognized that India’s economy was primed for phenomenal growth and decided that his life was about to change. Giving up his job as a successful and well-paid actuary, Asdhir pursued his idea of creating a mutual fund company focused exclusively on the emerging market in India.

“As an actuary, what you do is look at historical data, and then you extrapolate and project what you think will happen in the future,” says Asdhir, who came to Canada from New Delhi with his family when he was 16. “Being from India, I had kept my eye on what was happening there, and I couldn’t help but notice around 1996 that the economy was on the cusp of taking off.”

What Asdhir saw was a country of 1 billion people with an emerging middle class ready for massive expansion.

“I saw India was going to experience this phenomena, and that’s when I decided to follow my dream,” he says.

When Asdhir started making the rounds to try to drum up investors for his idea, he says 98 out of 100 people told him he was crazy.

“But I would get my energy from those

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two people and carry on,” he says. “Once you find your dream, you are willing to overcome anything. And when you’re passionate about something, when you feel that this is what your life represents, there is no plan B.”

Driven to excel By 1998, Asdhir had founded Excel Funds

And that kind of growth appears set to continue. Last year, the Indian Sensex Index was up 43%, in Canadian dollar terms, and according to a recent Merrill Lynch report, of the previous nine times the Indian market produced a return greater than 30%, it provided a positive return in seven of the following years, averaging 17.5%.

“All the emerging markets are in a longterm bull cycle. There is no doubt about that. So it makes a lot of sense for investors to look at emerging markets” Management and launched the Excel India Fund. Within five years, he created two more emerging market funds, and the company was profitable.

Currently, Excel has 14 funds and is the only exclusive emerging markets mutual fund company in Canada. Its Excel India Fund, series F, had a total return of 54.2% in 2014, according to Morningstar Canada, making it the best performing mutual fund in Canada. Meanwhile, the Excel Chindia Fund, series F, had a total return of 32.7% and was ranked 10th for the same period.

Since 2007, Excel Funds also has won three Lipper Awards.

It’s not rocket science, says Asdhir. “All the emerging markets are in a long-term bull cycle. Over 20- or 40-year cycles, emerging markets are going to outperform the developed world. There is no doubt about that. So it makes a lot of sense for investors to look at emerging markets.”

Secrets of success Asdhir credits Excel Funds’ success to its use of sub-advisors located on the ground in the countries where the investments are made. The company has more than 200 portfolio managers in its key markets, including Birla Sun Life, Itau USA Asset

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5/06/2015 3:05:17 PM

PROFILE Name: Bhim Asdhir Company: Excel Funds Management Title: President and CEO Age: 51 Years in the industry: 17 Educational background: Asdhir holds a double degree in actuarial science and computer science from the University of Waterloo

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5/06/2015 3:05:27 PM

FEATURES

INDUSTRY ICON BHIM ASDHIR’S CAREER TIMELINE

1987

Management and Baring International Investment, who manage more than US$1.5 trillion in assets.

“To invest in emerging markets, you have to be on the ground in those countries, and we did that early on,” Asdhir says. “And we’ve partnered with the ‘who’s who’ of subadvisors in emerging markets.”

According to Asdhir, the growth in emerging markets is happening just outside of the index. “These are the companies that

A bright future Asdhir says the future of investing belongs to emerging markets for several reasons.

Lower debt levels and higher foreign reserves provide emerging market governments with greater flexibility to implement policies that target inflation, interest rates and currency stability. The market capitalization of emerging markets also has expanded exponentially since 2000. Some predictions have it reaching US$80 trillion by 2030.

“To invest in emerging markets, you have to be on the ground in those countries, and we did that early on. And we’ve partnered with the ‘who’s who’ of sub-advisors in emerging markets” are going to be in the index in the future, and to invest in these companies, you can’t be in Singapore or New York; you have to be in those countries.”

The buy-and-hold strategy doesn’t work when investing in emerging markets, he adds. “Investors need to be active in emerging markets, and in order to succeed, you need to have a portfolio manager who is active and understands the local nuances of the macro and micro trends of those economies.”

Excel Funds has also developed, over the years, proprietary quantitative models to help select the best companies to invest in.

“We believe that each emerging market has unique characteristics and cycles, and we invest in well-researched, globally competitive companies with sustainable growth potential, visionary corporate management and fundamentally good corporate governance,” Asdhir says. “Our ultimate goal is to generate solid long-term returns without taking undue risk.”

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In addition, the younger demographic and a growing middle class in emerging markets will fuel increased domestic consumption and infrastructure development, contributing to accelerated economic growth.

Those truths were not self-evident 19 years ago when Asdhir was attempting to get his dream off the ground.

“It’s been a complete turnaround,” he says. “Back then it was hard to see, but investors have seen that emerging markets have outperformed in the long run, and by and large, most advisors and investors see that that is where the growth is. Convincing them to invest in emerging markets is not that hard anymore.”

After all, the numbers don’t lie. The Excel India Fund has multiplied investors’ money seven times over since it was launched.

Ten years ago, China’s economy topped $2 trillion, and now it’s north of $10 trillion.

“That’s the future for India,” Asdhir says.

“The best is yet to come.”

Graduates from the University of Waterloo with a double degree in actuarial science and computer science; joins actuarial consulting firm Watson Wyatt (now Towers Watson)

1996 1998

Launches Excel India Fund

Founds Excel Funds Management in Mississauga, Ont.

2000

Launches Excel China Fund

2007

Is named Male Entrepreneur of the Year by the IndoCanada Chamber of Commerce; launches Excel Emerging Europe Fund; wins Lipper Award

2001

Launches Excel Chindia Fund

2008 2010

Launches Excel Latin America Fund

2012

2015

Launches Excel Emerging Markets Fund

Wins Lipper Award

2014

Wins Lipper Award

Excel Funds Management is recognized as one of Canada’s Top Small & Medium Employers

www.wealthprofessional.ca

20-23_Industry Icon-SUBBED4.indd 22

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23

2015-05-28 12:07 5/06/2015 9:40:39 AM PM

FEATURES

COVER STORY: BIG IDEAS

Trending

up

There are more than six months left on the calendar this year, but several key trends have already made an indelible mark on the industry’s 2015 agenda

WE’RE ONLY halfway through the year, but several key trends are already having a profound impact on the industry, from book succession to the rise of the family office.

While many of these trends stem from regulatory change, each, more broadly, is underpinned by shifting consumer demands and client relationships.

“Wealth management is coming centre stage,” says Raj Kothari, PwC’s global asset management assurance leader and national asset management practice leader in Canada. “All the retail business is now focused on the client. It’s not just giving them money for the homes or their personal lines of credit. They’re saying, ‘How do I broaden that relationship?’ The banks and the insurance companies are saying that wealth management is taking much more importance than it has in the past.”

The trends, identified by industry analysts and advisors across the country, run the gamut from key improvements to compensation models to the number of dually licensed advisors focusing on segregated funds.

Each of these trends is poised to transform advisor business and, in some cases, directly impact clients. Read on to find out what you need to keep an eye on for the rest of the year.

24

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www.wealthprofessional.ca

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5/06/2015 9:56:54 AM

BOOK SUCCESSION 1.

BOOK SUCCESSION Advisors help clients create their own succession plans, but they often don’t have one of their own. That’s rapidly changing THE AVERAGE age of a financial advisor today is 58, so it stands to reason that book succession is an important issue.

“It’s huge,” agrees Raj Kothari, global asset management assurance Raj Kothari, PwC leader and national asset management practice leader for PwC. “This is a big issue.

I don’t think the industry has come to grips with succession.”

But that’s changing as the issue moves onto the radar screens of advisors.

“I think it’s been an issue for a while, but it’s become more prevalent to me in the last year just talking to advisors,” says Steve Meehan, CEO of Evolution Wealth Advisors, a Mississauga-based firm that helps advisors with succession planning.

“I myself am 50, and when I used to run the Investment Planning Council, I used to do presentations, and I was the youngest guy in the room. Well, I’m still the youngest guy in the room.”

Some companies are starting to get ahead of the curve on this issue.

“Certain groups and institutions and larger players are doing very well with how [they] ensure the succession plan is happening, so it’s not just jumping off a cliff and finding a new advisor,” Kothari says.

But it’s harder for smaller players to find that success.

“I think for most advisors, it is certainly on their minds,” Meehan says. “Many of them don’t have it because they think this is the kind of business [they] can continue to run for as long as [they] choose.”

Current buyer-toseller ratio

50 : 1

Average age of seller

Average age of buyer

60 45-50

Trend in action The Horwood Team at Richardson GMP has looked outside the industry to find success in their succession strategy.

“We start off with client service rather than sales,” says John Horwood, director of wealth management. “We can build the investment mechanics over time quite easily, but if you start from the right place, it’s much, much easier.”

This approach has led to Horwood successfully transitioning a chunk of his book over to Nancy Nicol, his long-time assistant, who joined the practice 14 years ago.

“Nancy now has $100 million in assets transitioned to her,” says John’s wife, Rebecca Horwood, the firm’s director of wealth management and portfolio manager. “She was already doing the client service, and she was the go-to person – people were calling her

STRATEGIES 1. Identify and match senior advisors with a new advisor so the young advisor can get to know the clients.

2. Some institutions have adopted a formula by which they pay for the book the advisor is managing so there’s some element of certainty.

3. Larger asset managers are more focused on training and building on relationships, making a point to reach out to young advisors through training, social and business etiquette seminars, and through specific training on their products.

4. Other organizations have adopted a model in which they bring in a certain number of future advisors and have them do a number of functions within the organization. They also have these young advisors shadow lead advisors at their own cost.

and not John anymore. I call her John’s right-hand man.”

Their five- to 10-year strategy can be boiled down quite succinctly. “Hire the right people with the right values, and then mentor the heck out of them over a long period of time until they’re ready,” John says.

But it’s not all learning – advisors are still expected to perform. “During the process, we expect them to work hard and grow that business,” John says. “In fact, we’d like to see them double it during the five years we’re mentoring them.”

So far, the Horwoods’ two daughters, Alexandra and Rosemary, have benefited from this strategy. But the Horwoods aren’t just transitioning the business to family – they’ve completed two other succession plans, and have two more in progress.

KEY TAKEAWAYS 1. You have to have a plan, says Meehan. “I’ve seen so many times, particularly in a situation where an advisor passes away and you have a spouse who’s left with the business who doesn’t know how to run the business, [how hard it is to] maximize value when you’re on your back foot. Put a plan in place today so you know that you have it.”

2. Identify the right partner. You may have a plan, but you have to know the person you’re partnering with is somebody who can execute that plan. In other words, know that the capital is going to be there, etc.

3. Grow the independence of the firm – get your business to a point where it isn’t totally dependent on you, says Meehan. “Change it from a sole proprietorship to a real business because that will enhance the value of your business when you do go to sell it,” he suggests.

www.wealthprofessional.ca

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5/06/2015 9:57:02 AM

FEATURES

COVER STORY: BIG IDEAS 2. PARING BACK THE BOOK ‘Less is more’ is not an easy concept for most advisors to grasp, but an increasing number are actively exploring the merits of that strategy CULLING THE chaff from your golden book is a trend that’s starting to gain momentum in the industry.

“I would say I’m casually observing it,” says Thane Stenner, a director Thane Stenner, and portfolio manager StennerZohny with StennerZohny Investment Partners, a multi-family office within Richardson GMP that has $27 billion in assets under advisement. “The stumbling block for a lot of advisors is they feel a sense of nervousness around shrinking in order to grow.”

Raj Kothari of PwC also sees the trend picking up steam.

“If you are a new kid on the block and you are trying to build a book, then you’re obviously taking in whatever you can,” he says. “It’s always easier and more economical to have 10 large clients with $1 million than 100 clients with $100,000 each. Obviously you are going to see that trend.”

In and of itself, the trend is raising some alarm in the wealth management community. Some veterans have voiced concern that paring back client numbers usually heralds the move to a fee-based model. That runs the risk of leaving low-asset clients out in the cold. And does this trend also strengthen the foothold for robo-advisors?

QUESTIONS TO CONSIDER What do you want to be exceptionally good at?

What are the ideal types of clients you want to be interacting with?

Are you ready for a reset or a refresh in your career?

Are you ready to push that reset button?

26

Trend in action Cutting your book by 98% is scary – and Thane Stenner of StennerZohny Investment Partners knows that feeling all too well after making the decision to trim his practice from 650 clients to 10.

“It’s a little nerve-wracking,” he says.

“You get to a very comfortable place in your practice. I was looking for a new intellectual challenge of dealing with the complexities of ultra-affluent families, and so you kind of make a decision to do it. You’re on that track, and it’s a little nerve-wracking, but at the same time, it felt like it was a good decision for our practice.”

Ten years after making the decision, Stenner reports that Richardson GMP has one of the highest average household account sizes, with 51 clients who have a minimum net worth of $10 million.

“We’re focused on bringing in eight to 10 clients over the next three to four years, and then we’ll cap our practice,” he says.

But the process of culling his practice

CHALLENGES 1. ADVISOR MENTALITY “[The main hurdle is] trying to balance off concept of, ‘If I cut back and transfer a certain number of relationships, my revenue is going to go down,’” Stenner says.

2. UNCERTAINTY ABOUT HOW TO PROCEED “They may have known some of these clients for a long period of time, and there’s a sense of loyalty and obligation to them,” Stenner says. “By the same token, what they don’t realize is the 80/20 rule still applies. Some 80% can take up a lot of clients.”

took approximately five years to accomplish. He brought it in four associates and investment advisors to take over the rest of his clients.

“I was still involved in the client relationship over those five to six years, but I gradually was weaned out of the picture as their role and prominence and day-to-day activity picked up. I think clients viewed it as quite seamless,” he says.

For advisors who want to take the next step in their career, Stenner says trimming their book is the way to do it.

“At the end of the day, the only way you can go upmarket is you have to be able to create the service offering and the time in order to service the remaining clients even better,” he says. “If you don’t make that dedicated effort to trim and transition the bottom 20% of your clients each year, you’re not going to have time to find new clients and service your upper-end clients better, which is kind of the whole objective.”

TIPS 1. DEVELOP A GAME PLAN 2. COMMIT TO IT 3. BRING IN BRIGHT PEOPLE OR PARTNER UP

“At the end of the day, you have to really buy into the concept of scaling back before you’re going to scale higher,” Stenner says. “You have to really think about this and really assess if this type of strategy is for you. And if it is, you have to really build out a dedicated game plan to execute on it and don’t waver.”

www.wealthprofessional.ca

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2015-06-05 1:10:23 PM

3. LIVING WITH ROBO-ADVISORS Advisors are going to have to learn to coexist with robo-advisors. But is that really a cause for concern?

WHILE MANY advisors would love to dismiss robo-advisors out of hand, it seems more likely that they’ll have to get used to them.

“We have yet to see how the digital models will hold up in a market downturn and whether they will reach profitability quickly enough, but the improved client experience and high level of transparency can’t be underestimated,” says Gregory Smith, wealth management advisory leader at Ernst & Young. “They’re also tapping into markets that are largely ignored by traditional wealth managers.”

The biggest indicator that robo-advisors have staying power is the fact that big firms are starting to push back against the perceived threat.

US giant Charles Schwab is fighting fire with fire in the battle to keep clients from fleeing to robo-advisors by undercutting the already lowball management fees at those upstart firms.

According to the New York Post, the battle of words between WealthFront CEO Adam Nash and Charles Schwab broke out after the Wall Street firm recently rolled out its ‘Intelligent Portfolios,’ which rely on automated technology to make investment decisions for investors all the while keeping costs low. The new Schwab offering effectively mirrors the offerings of robo firms such as WealthFront, but – here’s the rub – at an even lower cost.

CANADIAN ROBO-ADVISOR FIRMS Wealthsimple

ShareOwner

WealthBar

Idema Investments

Nest Wealth

Invisor Investment Management

Trend in action For advisors who are concerned about the influx of robo-advisors in Canada, it may be time to do some soul searching.

“If there are people out there who are nervous about the robos coming in, you’d have to ask yourself, are you adding any value to your clients’ situation?” says Dave Nugent, Portfolio Manager at Wealthsimple, a robo-advisory firm.

“The advisors who are adding value, I don’t think they believe we’re much of a competitive threat.”

Despite the chatter in some media outlets about the danger to advisors, Nugent says he’s yet to see any backlash.

“The industry is quite excited about it,” he says. “I don’t see the pushback. I think that has been kind of played up.”

For advisors paring back their books or incorporating an online component to better serve low-asset clients, a partnership with a robo-firm – white-labelling those services – can free up time to really focus on clients.

“It automates a lot of the minutiae you typically have to deal with as an advisor,” Nugent says. “Taking a lot of those processes that are typically done manually and automating them just makes the advisor’s role that much easier and that

much more important. They can spend more time focusing on the end client.”

While robo-advisors are a relatively new phenomenon in Canada, they have been around in the US for a while, and recent estimates have them managing more than $15 billion in assets. In Canada, Power Financial Corp. invested up to $30 million in Wealthsimple, while another robo-advisor, WealthBar, has a partnership with Nicola Wealth Management.

“I think the robo space of automated investment management as a whole is here to stay,” Nugent says. “I think that technology has had a huge effect on other industries, and I think we’re finally seeing technology starting to disrupt the ... financial services industry.”

UNTAPPED MARKET The current estimated market share of digital wealth firms is just 0.01% of the US$33 trillion industry Robo-advisors already have a significant presence in the United States, where recent estimates have them managing more than US$15 billion in assets.

www.wealthprofessional.ca

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2015-06-05 1:10:33 PM

FEATURES

COVER STORY: BIG IDEAS 4. ACTIVE MANAGEMENT Passivity is increasingly passé for advisors – a growing number are turning once again to active management to provide returns that simply require more work Trend in action

*Distribution yield of the Class A units of the fund for the period November 13, 2007 (inception) to March 31, 2015. The distribution yield at a given time is calculated by dividing the distributions made over the 12 month period prior to that time by the market value at that time. The fund intends to distribute monthly. The monthly distribution rate is expected to be 1/12th of approximately 4% per annum for Class A units. Distributions for other classes may vary. The monthly distribution rates may be adjusted from time to time at our discretion. The payment of distributions is not guaranteed and may fluctuate. If the annual amount distributed exceeds the portfolio’s net income and net realized capital gains, such excess will constitute a return of capital. 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. Management fees for Class A and Class F units are outlined in the Fund Facts and the Simplified Prospectus. 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.

24-33_Cover Story-Trends2-SUBBED.indd 28

Markets are becoming more complex, investment products are proliferating, and a largerthan-ever proportion of Canadians is heading for retirement, many without defined Greg Hall, RBC benefit pension plans. Dominion Securities Getting financial advice is pretty much a no-brainer, but some investors are looking for more than passively managed investments. That’s where financial advisors who use an active management philosophy enter the picture.

Active management, along with advice from advisors, seems to be a commonsense approach. In 2011, the Investment Funds Institute of Canada commissioned a survey that evaluated the impact financial advisors were having on Canadians’ financial health. Across all income brackets, people who worked with advisors had up to 6.5 times more wealth than people who didn’t. The survey also found that advised households held 54% of their assets in stocks, compared to 42% of nonadvised investors.

Greg Hall, a fee-based investment advisor with RBC Dominion Securities in Toronto, says for anyone who has a long-term

investment outlook, active management far surpasses passive management.

“Active management doesn’t increase the costs, and I’m a firm believer in it,” he says.

Some critics argue active management is simply managers reacting to the market, but Hall couldn’t disagree more.

“I’m watching the market every day – I’m acting and I’m reacting. The only time I will sell out of a position completely is if something changes within management.

Unless something hasn’t fundamentally changed, I am active, in the sense that I’m rebalancing. And I rebalance quarterly. I am reacting, but I think a better term for it would be ‘pre-acting.’”

Hall says rebalancing a portfolio allows the investor to be properly positioned to take advantage of corrections or accelerations. He cites the 2008 economic meltdown as an example of active management paying off. “The market was down around 38%, and we were down 12%.

Was that good? No, but when you compare apples to apples, that active management of rebalancing served us well.”

His philosophy also includes sector diversification and, when it’s warranted by geopolitical situations such as the RussiaUkraine affair last year, utilizing options or futures to hedge the downside.

ACTIVE MANAGEMENT: TODAY’S CHALLENGE

86%

of active large-cap fund managers failed to beat their benchmarks in the last year

89%

have underperformed the past five years

82%

have underperformed over the last decade

5/06/2015 9:57:24 AM

5. FEE-BASED COMPENSATION In the run-up to full implementation of CRM2, the trend is decidedly in favour of fee-based compensation, but there’s more to it than meets the eye

INVESTORS’ TAKE

77%

of investors say they understand their advisor’s investment philosophies

38%

of investors did not understand the various sales charge options

77%

of investors feel they understand how their advisor is compensated

95%

of investors with an advisor are satisfied with their current advisor

71% 80%

of investors understand all fees associated with their funds

Distribution Yield (%)

5 4 3 2 1

13 20

v-

No

vNo

M 2014 ar -2 01 5

12

11 20

20 vNo

vNo

No

v-

20

10

09

08

20 vNo

20 v-

v-

20

07

0 No

has taken so long to be picked up by advisors in Canada is due to the fact that the commission-based model offered a greater revenue stream.

“The argument for the fee-based model was that after about six years, you’d be making more money because you would be collecting 1% a year instead of 0.5%. But not many people wanted to wait six years.”

According to Birenbaum, investor knowledge, media coverage and competitive pressures have moved the fee-based model forward, but what’s really going to put it over the edge is CRM2.

“It’s taken 15 years for the competitive pressures to get the industry to a point where the take-up of fee-based practices is around 35%, the majority of whom are established players with sizeable books of business who can afford not to take that 5% commission.”

Birenbaum says that when investors find out that, for example, for every $1 million invested, their advisor will be paid $50,000, advisors are going to have a hard time justifying that fee to the client.

“And what that is going to do, except in some circumstances, is severely limit the commission-based model.”

No

COMMISSION-BASED advisors seem to be bringing in more fee-based accounts in recent years.

According to a Price Metrix report, the percentage of fee-based assets in the average Rona Birenbaum, advisor’s book increased Caring for Clients from 31% to 35% in 2014, while the percentage of fee revenue rose from 47% to 53%.

Financial planner Rona Birenbaum, who has used the fee-for-service model since founding Caring for Clients in 2000, believes the motivation for advisors to switch has changed over the past 15 years.

“What motivated me to use the fee-based model was I thought it was the right thing to do,” she says. “When I joined the industry 19 years ago, there was very little discussion about the fee-based model; in fact, it was basically nonexistent in Canada. The only model presented to me was the DSC commissionbased one. After four years in the brokerage business, I decided the commission model wasn’t in the clients’ best interest.”

Birenbaum thinks the fee-based model

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www.wealthprofessional.ca

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5/06/2015 9:57:30 AM

FEATURES

COVER STORY: BIG IDEAS 6. INSURANCE Wealth advisors are starting to dip more into segregated funds to avoid the effects of CRM2, while insurers are starting to drift into wealth management to ride out the interest rate storm ADVISORS’ WEALTH books are looking more and more attractive to major insurers – is yours next?

“Wealth management has become more and more important, and if you think of the major institutions, particularly the large banks and insurance companies, they’ve all said they want 25% of their business coming from wealth,” says Raj Kothari, global asset management assurance leader and national asset management practice leader for PwC. In recent years, Sun Life, Great-West Life and Manulife have added tens of billions of dollars through strategic acquisitions to grow their wealth management books.

There are a number of factors forcing this shift, chief among them the current economic and regulatory environment. “[They] are pushing companies to change their products – they want less costly products,” says Marc-Andre Giguere, a Canadian financial services insurance leader at Ernst & Young. “The low interest rates are really making insurance expensive, and regulations and the capital requirements on insurance are pretty high. It’s less expensive or less risky for insurance companies in the wealth management space.”

Consumers are also initiating change, as they increasingly demand more wealth management products. “It’s fitting the companies’ strategies as far as de-risking, but I think it’s also the consumer demand around wealth management,” Giguere says.

And advisors are doing their part, too – many financial advisors are advocating a prominent place for life insurance in a broader financial plan.

“We are seeing brokers and advisors look at things more holistically, where they look at coverage for insurance and wealth and savings,” says Nazir Valani, a senior actuary at KPMG.

30

SEG FUNDS GAIN MOMENTUM Increasing numbers of the dually licensed are ditching mutual funds and focusing on segregated funds to minimize the impact of CRM2 – that’s the buzz, at least.

“I have heard on the street of that practice,” says Chris Dewdney, a financial security advisor at DWL Financial Services, where every advisor is dually licensed. “It’s a major issue. The vested interest of the advisor should be that of the client, not of commission. I don’t agree with it. The majority of the industry would not agree with it. But the reality is it’s happening, and it will probably continue to happen.”

The regulatory changes that are coming in July 2016 will force advisors to disclose mutual fund fees and performance, but CRM2 doesn’t mandate disclosure on fees or product performance in terms of segregated funds. MFDA advisors have long complained that leaving segregated funds off of CRM2 is a contradiction.

Worryingly for insurance advisors, the popularity of segregated funds is on the rise, perhaps drawing more nefarious players. In March 2015, overall net assets in segregated funds reached $113.1 billion, compared with $104.3 billion a year previously, according to the Investor Economics monthly Insurance Service Advisory report. March 2015 also marked the highest monthly tally of net sales for segregated funds since February 2012, according to a recent Desjardins Securities report.

“First of all, I think segregated funds are a great product,” Dewdney says. “I think mutual funds are a great product.

It really depends on the client and the situation. Let’s not forget that although seg funds have a higher MER, they also potentially provide creditor protection; there are built-in guarantees on the funds, and they also bypass probate and estate. A seg fund could absolutely be the right recommendation, despite the higher fee associated with it.”

The trend of increased segregated fund sales could continue to creep upwards as many investors seek stability in their portfolios. According to a recent Sun Life poll, 98% of Canadians feel it is important to have some form of guaranteed income during their retirement years.

“The people who should be watching this are the dealers, because if you have a number of advisors and you see this practice increasing, then you’re going to have to reprimand those individuals and be proactive,” says Dewdney.

“It’s less expensive or less risky for insurance companies in the wealth management space” “They want to provide both, so the insurance companies are reacting to this. Definitely there is a move [toward], ‘Let’s sell insurance, and let’s also get into the wealth management business.’”

Some advisors were ahead of the curve in this regard, but the majority will have to play catch-up to be able to effectively offer what consumers want and insurers are offering.

“There were some advisors who were doing

life insurance and wealth management, but they were really specialized in one or the other,” Giguere says. “But I think what’s happening [now] is people who have been focused on life insurance for a long time are now having to retool and really change how they approach their customers, because the conversation between wealth management and life insurance is very different.”

www.wealthprofessional.ca

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5/06/2015 9:57:37 AM

INSURERS’ INTEREST IN WEALTH MANAGEMENT

Manulife

Sun Life

Great-West Life

ACQUIRED

ACQUIRED

ACQUIRED

Canadian-based operations of Standard Life New York Life Insurance Company’s Retirement Plan Services business

Ryan Labs, a fixed-income focused firm that invests on behalf of pension funds and institutions Started a third-party asset-management arm in 2014

JP Morgan Retirement Plan Services

$1.1 trillion

$691 billion

$734 billion

Total assets under management, up 40%

Assets under management, a 9% increase and 25th consecutive quarter of record AUM

Assets under management, up 15%

$207 billion

“When completed, these transactions will each accelerate our strategy to grow our wealth and asset management businesses around the world” Donald Guloien, CEO of Manulife

“We’ve had a great start in Canada with the launch of Sun Life Investment Management’s private asset class funds and LDI strategies, and the [Ryan Labs acquisition] is the next step in our growth. The transaction is also a perfect fit within the asset management pillar of Sun Life Financial’s four-pillar enterprise strategy” Steve Peacher, president, Sun Life Investment Management, and CIO, Sun Life Financial

JP Morgan Retirement Plan Services assets under management

“We’re looking towards acquisition opportunities – the pension space and asset management space are areas where we’re interested” Paul Mahon, CEO of Great-West Life

www.wealthprofessional.ca

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5/06/2015 9:57:44 AM

FEATURES

COVER STORY: BIG IDEAS 7. TFSAs Once given the short shrift by advisors, the lowly TFSA is moving into the big leagues thanks to the increase in contribution room. But has it eclipsed the RRSP as the impetus for the investor-advisor relationship?

WHEN THE TFSA was first introduced to the Canadian marketplace, it was derided as a tool that wouldn’t make much of a difference. That quickly changed when the government increased the contribution room from $5,500 to $10,000 annually, vaulting the TFSA into the big leagues.

“The TFSA has now become a contender for the best individual tax-sheltered investment account in Canada, a title long held by the venerable Registered Retirement Savings Plan [RRSP],” says Robyn Thompson, advisor and president of Castlemark Wealth Management.

In fact, a recent poll from CIBC found that 27% of Canadians plan to contribute more annually to their TFSA following the federal government’s decision to increase the annual contribution limit – and 4% have already topped up their account to the full $10,000 limit.

“It’s encouraging to see that Canadians are well aware of the increased TFSA limit, and that some are focused on increasing their contributions, though not everyone is able to,” says Veni Iozzo, senior vice president of deposits, GICs and client solutions at CIBC. While the increase in contribution room doesn’t mean the TFSA will replace the RRSP, it does make it more compelling as a retirement tool. Moreover, it is providing advisors the lead in to talking to prospective clients – not unlike the RRSP traditionally has.

“You can withdraw the money whenever you want – or leave it in the TFSA to grow even more,” says Thompson, echoing the initial conversations advisors are having with younger clients in that first, all-important consultation. “That means no messy ‘maturity’ deadlines or RRIFs to worry about, and no residual tax effects. The money is yours, ‘free and clear,’ to do with as you wish.”

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Trend in action It hasn’t taken long for advisors to see that the increase in TFSA contribution room can be a boon for their clients.

“Without a doubt, in my small business, I’m reaching out to every client who has a non-registered account that’s maxed to increase their TFSA room,” says Matthew Bishop, an advisor at Bishop Wealth Management.

Unsurprisingly, wealthy individuals stand to gain the most.

“High-net-worth clients stand to reap the most benefit from increased TFSA contribution limits,” says Robyn Thompson, president of Castlemark Wealth Management. “These clients have the best ability to maximize contributions and begin the process of tax-free compound growth immediately. In addition, such clients would benefit immensely from the

fact that TFSA withdrawals at retirement are immunized from the OAS clawback.

Clients quickly see the advantage of the increased TFSA contribution room when I demonstrate with a graphic example of what they can expect.”

While many advisors and pundits point to the increase in contribution room being particularly good for wealthy clients, savvier advisors are using it as a first point of contact with young Canadians.

“I think [the TFSA] should be the first call to action for most young people,” Bishop says. “A medical student or a practicing lawyer who’s just starting out ... once they make these bigger incomes, they’re going to get way more bang for their dollar, even if they transfer their TFSA into their RRSP. At that point, they’d be better off in a lot of cases than they would contributing early.”

EXAMPLE: HOW THE TFSA INCREASE CAN BENEFIT CLIENTS Investor: a 40-year-old making $80,000 per year; already has $35,000 in a TFSA Now contributes $10,000 at the start of each year until he retires at age 65 Combined investments inside the TFSA earn an average annual rate of return of 8% By 65, the investor has accumulated $1,000,000

“It’s encouraging to see that Canadians are well aware of the increased TFSA limit, and ... are focused on increasing their contributions”

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5/06/2015 9:57:49 AM

8. THE FAMILY OFFICE It’s a model that was created at the very top, and it’s now flowing down the hill to advisors who are servicing high-net-worth clients outside of those families with billionaire legacies FAMILY OFFICE

Trend in action The idea of a ‘family office,’ where an entire family’s wealth is managed by a single firm or entity, goes back centuries, but the modern incarnation is typically a multi-family office, in Adam Doering, The which financial advi- Waterfront Group sors are essentially the quarterbacks who coordinate the activities of clients’ other advisors and assist in tackling any financial issues that touch the whole family.

The family office Dan Wynnyk, The is a nascent business Waterfront Group model in Canada, but it’s been growing as more entrepreneurs and executives in this country reach an age and wealth level that makes them open to a new approach to asset management.

According to a global wealth study by Boston Consulting Group, in 2013, Canada ranked seventh in global ‘ultra-high-networth’ households, meaning those with assets exceeding $100 million.

The Waterfront Group of CIBC Wood Gundy, founded in 2000 by Adam Doering and Dan Wynnyk, has moved closer to being a true family office during the past year after reducing their number of clients – “so that we are able to spend a much greater amount of time on each relationship, which is what we want to do,” says Doering.

If they don’t meet the criteria to qualify as a true ‘family office,’ Doering says that’s OK, pointing out that the concept of a family office is really just wealth management, and

what The Waterfront Group does for its clients is much more encompassing.

Doering says conversations he’s had with family office practitioners in Canada recently “were real eye-openers.”

“When I asked them what they do, they said they manage money. All they’re doing is due diligence on the managers and reporting. I said to myself, ‘We’re more of a family office than you are, and you’re the ‘family office.’”

Doering and Wynnyk, along with their team, believe the most successful wealth advisors are going to be ones who do more than just trade stocks. “Our value is in recognizing that our clients are busy, and finding out what’s important to them and helping to make it happen,” Doering says.

“We want to be the best listeners who have ever sat down in front of our clients.”

The Waterfront Group’s process identifies planning opportunities and recommends wealth, tax, credit and estate strategies in the context of a cohesive plan that they then help to implement and monitor.

They do this by collaborating with clients’ accountants, attorneys and other trusted professionals to help to coordinate a team approach that meets all of their clients’ financial objectives and ensures that no detail is overlooked. If a client requires additional resources, The Waterfront Group can make introductions from their network of professionals, Doering adds.

While The Waterfront Group’s model may be an adaptation, Doering believes their version of a one-stop shop is unique.

“The better we get at it and the more people we talk to, the more we realize how few people operate like us.”

OLD MODEL Financial advisor Lawyer Client

Accountant Insurance Tax planning Estate planning

NEW MODEL Lawyer Accountant Financial advisor

Insurance Tax planning Estate planning

“Our value is in recognizing that our clients are busy, and finding out what’s important to them and helping to make it happen”

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BOOK SUCCESSION 1.

BOOK SUCCESSION Advisors help clients create their own succession plans, but they often don’t have one of their own. That’s rapidly changing THE AVERAGE age of a financial advisor today is 58, so it stands to reason that book succession is an important issue.

“It’s huge,” agrees Raj Kothari, global asset management assurance Raj Kothari, PwC leader and national asset management practice leader for PwC. “This is a big issue.

I don’t think the industry has come to grips with succession.”

But that’s changing as the issue moves onto the radar screens of advisors.

“I think it’s been an issue for a while, but it’s become more prevalent to me in the last year just talking to advisors,” says Steve Meehan, CEO of Evolution Wealth Advisors, a Mississauga-based firm that helps advisors with succession planning.

“I myself am 50, and when I used to run the Investment Planning Council, I used to do presentations, and I was the youngest guy in the room. Well, I’m still the youngest guy in the room.”

Some companies are starting to get ahead of the curve on this issue.

“Certain groups and institutions and larger players are doing very well with how [they] ensure the succession plan is happening, so it’s not just jumping off a cliff and finding a new advisor,” Kothari says.

But it’s harder for smaller players to find that success.

“I think for most advisors, it is certainly on their minds,” Meehan says. “Many of them don’t have it because they think this is the kind of business [they] can continue to run for as long as [they] choose.”

Current buyer-toseller ratio

50 : 1

Average age of seller

Average age of buyer

60 45-50

Trend in action The Horwood Team at Richardson GMP has looked outside the industry to find success in their succession strategy.

“We start off with client service rather than sales,” says John Horwood, director of wealth management. “We can build the investment mechanics over time quite easily, but if you start from the right place, it’s much, much easier.”

This approach has led to Horwood successfully transitioning a chunk of his book over to Nancy Nicol, his long-time assistant, who joined the practice 14 years ago.

“Nancy now has $100 million in assets transitioned to her,” says John’s wife, Rebecca Horwood, the firm’s director of wealth management and portfolio manager. “She was already doing the client service, and she was the go-to person – people were calling her

STRATEGIES 1. Identify and match senior advisors with a new advisor so the young advisor can get to know the clients.

2. Some institutions have adopted a formula by which they pay for the book the advisor is managing so there’s some element of certainty.

3. Larger asset managers are more focused on training and building on relationships, making a point to reach out to young advisors through training, social and business etiquette seminars, and through specific training on their products.

4. Other organizations have adopted a model in which they bring in a certain number of future advisors and have them do a number of functions within the organization. They also have these young advisors shadow lead advisors at their own cost.

and not John anymore. I call her John’s right-hand man.”

Their five- to 10-year strategy can be boiled down quite succinctly. “Hire the right people with the right values, and then mentor the heck out of them over a long period of time until they’re ready,” John says.

But it’s not all learning – advisors are still expected to perform. “During the process, we expect them to work hard and grow that business,” John says. “In fact, we’d like to see them double it during the five years we’re mentoring them.”

So far, the Horwoods’ two daughters, Alexandra and Rosemary, have benefited from this strategy. But the Horwoods aren’t just transitioning the business to family – they’ve completed two other succession plans, and have two more in progress.

KEY TAKEAWAYS 1. You have to have a plan, says Meehan. “I’ve seen so many times, particularly in a situation where an advisor passes away and you have a spouse who’s left with the business who doesn’t know how to run the business, [how hard it is to] maximize value when you’re on your back foot. Put a plan in place today so you know that you have it.”

2. Identify the right partner. You may have a plan, but you have to know the person you’re partnering with is somebody who can execute that plan. In other words, know that the capital is going to be there, etc.

3. Grow the independence of the firm – get your business to a point where it isn’t totally dependent on you, says Meehan. “Change it from a sole proprietorship to a real business because that will enhance the value of your business when you do go to sell it,” he suggests.

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FEATURES

COVER STORY: BIG IDEAS 2. PARING BACK THE BOOK ‘Less is more’ is not an easy concept for most advisors to grasp, but an increasing number are actively exploring the merits of that strategy CULLING THE chaff from your golden book is a trend that’s starting to gain momentum in the industry.

“I would say I’m casually observing it,” says Thane Stenner, a director Thane Stenner, and portfolio manager StennerZohny with StennerZohny Investment Partners, a multi-family office within Richardson GMP that has $27 billion in assets under advisement. “The stumbling block for a lot of advisors is they feel a sense of nervousness around shrinking in order to grow.”

Raj Kothari of PwC also sees the trend picking up steam.

“If you are a new kid on the block and you are trying to build a book, then you’re obviously taking in whatever you can,” he says. “It’s always easier and more economical to have 10 large clients with $1 million than 100 clients with $100,000 each. Obviously you are going to see that trend.”

In and of itself, the trend is raising some alarm in the wealth management community. Some veterans have voiced concern that paring back client numbers usually heralds the move to a fee-based model. That runs the risk of leaving low-asset clients out in the cold. And does this trend also strengthen the foothold for robo-advisors?

QUESTIONS TO CONSIDER What do you want to be exceptionally good at?

What are the ideal types of clients you want to be interacting with?

Are you ready for a reset or a refresh in your career?

Are you ready to push that reset button?

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Trend in action Cutting your book by 98% is scary – and Thane Stenner of StennerZohny Investment Partners knows that feeling all too well after making the decision to trim his practice from 650 clients to 10.

“It’s a little nerve-wracking,” he says.

“You get to a very comfortable place in your practice. I was looking for a new intellectual challenge of dealing with the complexities of ultra-affluent families, and so you kind of make a decision to do it. You’re on that track, and it’s a little nerve-wracking, but at the same time, it felt like it was a good decision for our practice.”

Ten years after making the decision, Stenner reports that Richardson GMP has one of the highest average household account sizes, with 51 clients who have a minimum net worth of $10 million.

“We’re focused on bringing in eight to 10 clients over the next three to four years, and then we’ll cap our practice,” he says.

But the process of culling his practice

CHALLENGES 1. ADVISOR MENTALITY “[The main hurdle is] trying to balance off concept of, ‘If I cut back and transfer a certain number of relationships, my revenue is going to go down,’” Stenner says.

2. UNCERTAINTY ABOUT HOW TO PROCEED “They may have known some of these clients for a long period of time, and there’s a sense of loyalty and obligation to them,” Stenner says. “By the same token, what they don’t realize is the 80/20 rule still applies. Some 80% can take up a lot of clients.”

took approximately five years to accomplish. He brought it in four associates and investment advisors to take over the rest of his clients.

“I was still involved in the client relationship over those five to six years, but I gradually was weaned out of the picture as their role and prominence and day-to-day activity picked up. I think clients viewed it as quite seamless,” he says.

For advisors who want to take the next step in their career, Stenner says trimming their book is the way to do it.

“At the end of the day, the only way you can go upmarket is you have to be able to create the service offering and the time in order to service the remaining clients even better,” he says. “If you don’t make that dedicated effort to trim and transition the bottom 20% of your clients each year, you’re not going to have time to find new clients and service your upper-end clients better, which is kind of the whole objective.”

TIPS 1. DEVELOP A GAME PLAN 2. COMMIT TO IT 3. BRING IN BRIGHT PEOPLE OR PARTNER UP

“At the end of the day, you have to really buy into the concept of scaling back before you’re going to scale higher,” Stenner says. “You have to really think about this and really assess if this type of strategy is for you. And if it is, you have to really build out a dedicated game plan to execute on it and don’t waver.”

3. LIVING WITH ROBO-ADVISORS Advisors are going to have to learn to coexist with robo-advisors. But is that really a cause for concern?

WHILE MANY advisors would love to dismiss robo-advisors out of hand, it seems more likely that they’ll have to get used to them.

“We have yet to see how the digital models will hold up in a market downturn and whether they will reach profitability quickly enough, but the improved client experience and high level of transparency can’t be underestimated,” says Gregory Smith, wealth management advisory leader at Ernst & Young. “They’re also tapping into markets that are largely ignored by traditional wealth managers.”

The biggest indicator that robo-advisors have staying power is the fact that big firms are starting to push back against the perceived threat.

US giant Charles Schwab is fighting fire with fire in the battle to keep clients from fleeing to robo-advisors by undercutting the already lowball management fees at those upstart firms.

According to the New York Post, the battle of words between WealthFront CEO Adam Nash and Charles Schwab broke out after the Wall Street firm recently rolled out its ‘Intelligent Portfolios,’ which rely on automated technology to make investment decisions for investors all the while keeping costs low. The new Schwab offering effectively mirrors the offerings of robo firms such as WealthFront, but – here’s the rub – at an even lower cost.

CANADIAN ROBO-ADVISOR FIRMS Wealthsimple

ShareOwner

WealthBar

Idema Investments

Nest Wealth

Invisor Investment Management

Trend in action For advisors who are concerned about the influx of robo-advisors in Canada, it may be time to do some soul searching.

“If there are people out there who are nervous about the robos coming in, you’d have to ask yourself, are you adding any value to your clients’ situation?” says Dave Nugent, Portfolio Manager at Wealthsimple, a robo-advisory firm.

“The advisors who are adding value, I don’t think they believe we’re much of a competitive threat.”

Despite the chatter in some media outlets about the danger to advisors, Nugent says he’s yet to see any backlash.

“The industry is quite excited about it,” he says. “I don’t see the pushback. I think that has been kind of played up.”

For advisors paring back their books or incorporating an online component to better serve low-asset clients, a partnership with a robo-firm – white-labelling those services – can free up time to really focus on clients.

“It automates a lot of the minutiae you typically have to deal with as an advisor,” Nugent says. “Taking a lot of those processes that are typically done manually and automating them just makes the advisor’s role that much easier and that

much more important. They can spend more time focusing on the end client.”

While robo-advisors are a relatively new phenomenon in Canada, they have been around in the US for a while, and recent estimates have them managing more than $15 billion in assets. In Canada, Power Financial Corp. invested up to $30 million in Wealthsimple, while another robo-advisor, WealthBar, has a partnership with Nicola Wealth Management.

“I think the robo space of automated investment management as a whole is here to stay,” Nugent says. “I think that technology has had a huge effect on other industries, and I think we’re finally seeing technology starting to disrupt the ... financial services industry.”

UNTAPPED MARKET The current estimated market share of digital wealth firms is just 0.01% of the US$33 trillion industry Robo-advisors already have a significant presence in the United States, where recent estimates have them managing more than US$15 billion in assets.

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FEATURES

COVER STORY: BIG IDEAS 4. ACTIVE MANAGEMENT Passivity is increasingly passé for advisors – a growing number are turning once again to active management to provide returns that simply require more work Trend in action

*Distribution yield of the Class A units of the fund for the period November 13, 2007 (inception) to March 31, 2015. The distribution yield at a given time is calculated by dividing the distributions made over the 12 month period prior to that time by the market value at that time. The fund intends to distribute monthly. The monthly distribution rate is expected to be 1/12th of approximately 4% per annum for Class A units. Distributions for other classes may vary. The monthly distribution rates may be adjusted from time to time at our discretion. The payment of distributions is not guaranteed and may fluctuate. If the annual amount distributed exceeds the portfolio’s net income and net realized capital gains, such excess will constitute a return of capital. 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. Management fees for Class A and Class F units are outlined in the Fund Facts and the Simplified Prospectus. 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.

Markets are becoming more complex, investment products are proliferating, and a largerthan-ever proportion of Canadians is heading for retirement, many without defined Greg Hall, RBC benefit pension plans. Dominion Securities Getting financial advice is pretty much a no-brainer, but some investors are looking for more than passively managed investments. That’s where financial advisors who use an active management philosophy enter the picture.

Active management, along with advice from advisors, seems to be a commonsense approach. In 2011, the Investment Funds Institute of Canada commissioned a survey that evaluated the impact financial advisors were having on Canadians’ financial health. Across all income brackets, people who worked with advisors had up to 6.5 times more wealth than people who didn’t. The survey also found that advised households held 54% of their assets in stocks, compared to 42% of nonadvised investors.

Greg Hall, a fee-based investment advisor with RBC Dominion Securities in Toronto, says for anyone who has a long-term

investment outlook, active management far surpasses passive management.

“Active management doesn’t increase the costs, and I’m a firm believer in it,” he says.

Some critics argue active management is simply managers reacting to the market, but Hall couldn’t disagree more.

“I’m watching the market every day – I’m acting and I’m reacting. The only time I will sell out of a position completely is if something changes within management.

Unless something hasn’t fundamentally changed, I am active, in the sense that I’m rebalancing. And I rebalance quarterly. I am reacting, but I think a better term for it would be ‘pre-acting.’”

Hall says rebalancing a portfolio allows the investor to be properly positioned to take advantage of corrections or accelerations. He cites the 2008 economic meltdown as an example of active management paying off. “The market was down around 38%, and we were down 12%.

Was that good? No, but when you compare apples to apples, that active management of rebalancing served us well.”

His philosophy also includes sector diversification and, when it’s warranted by geopolitical situations such as the RussiaUkraine affair last year, utilizing options or futures to hedge the downside.

ACTIVE MANAGEMENT: TODAY’S CHALLENGE

86%

of active large-cap fund managers failed to beat their benchmarks in the last year

89%

have underperformed the past five years

82%

have underperformed over the last decade

5. FEE-BASED COMPENSATION In the run-up to full implementation of CRM2, the trend is decidedly in favour of fee-based compensation, but there’s more to it than meets the eye

INVESTORS’ TAKE

77%

of investors say they understand their advisor’s investment philosophies

38%

of investors did not understand the various sales charge options

77%

of investors feel they understand how their advisor is compensated

95%

of investors with an advisor are satisfied with their current advisor

71% 80%

of investors understand all fees associated with their funds

Distribution Yield (%)

5 4 3 2 1

13 20

v-

No

vNo

M 2014 ar -2 01 5

12

11 20

20 vNo

vNo

No

v-

20

10

09

08

20 vNo

20 v-

v-

20

07

0 No

has taken so long to be picked up by advisors in Canada is due to the fact that the commission-based model offered a greater revenue stream.

“The argument for the fee-based model was that after about six years, you’d be making more money because you would be collecting 1% a year instead of 0.5%. But not many people wanted to wait six years.”

According to Birenbaum, investor knowledge, media coverage and competitive pressures have moved the fee-based model forward, but what’s really going to put it over the edge is CRM2.

“It’s taken 15 years for the competitive pressures to get the industry to a point where the take-up of fee-based practices is around 35%, the majority of whom are established players with sizeable books of business who can afford not to take that 5% commission.”

Birenbaum says that when investors find out that, for example, for every $1 million invested, their advisor will be paid $50,000, advisors are going to have a hard time justifying that fee to the client.

“And what that is going to do, except in some circumstances, is severely limit the commission-based model.”

No

COMMISSION-BASED advisors seem to be bringing in more fee-based accounts in recent years.

According to a Price Metrix report, the percentage of fee-based assets in the average Rona Birenbaum, advisor’s book increased Caring for Clients from 31% to 35% in 2014, while the percentage of fee revenue rose from 47% to 53%.

Financial planner Rona Birenbaum, who has used the fee-for-service model since founding Caring for Clients in 2000, believes the motivation for advisors to switch has changed over the past 15 years.

“What motivated me to use the fee-based model was I thought it was the right thing to do,” she says. “When I joined the industry 19 years ago, there was very little discussion about the fee-based model; in fact, it was basically nonexistent in Canada. The only model presented to me was the DSC commissionbased one. After four years in the brokerage business, I decided the commission model wasn’t in the clients’ best interest.”

Birenbaum thinks the fee-based model

Renaissance Optimal Income Portfolio Distribution Yield – Class A units

Learn how Renaissance Optimal Income Portfolios meet real client needs at

realoutcomes.ca

of investors feel they are presented with a broad range of investment choices

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FEATURES

COVER STORY: BIG IDEAS 6. INSURANCE Wealth advisors are starting to dip more into segregated funds to avoid the effects of CRM2, while insurers are starting to drift into wealth management to ride out the interest rate storm ADVISORS’ WEALTH books are looking more and more attractive to major insurers – is yours next?

“Wealth management has become more and more important, and if you think of the major institutions, particularly the large banks and insurance companies, they’ve all said they want 25% of their business coming from wealth,” says Raj Kothari, global asset management assurance leader and national asset management practice leader for PwC. In recent years, Sun Life, Great-West Life and Manulife have added tens of billions of dollars through strategic acquisitions to grow their wealth management books.

There are a number of factors forcing this shift, chief among them the current economic and regulatory environment. “[They] are pushing companies to change their products – they want less costly products,” says Marc-Andre Giguere, a Canadian financial services insurance leader at Ernst & Young. “The low interest rates are really making insurance expensive, and regulations and the capital requirements on insurance are pretty high. It’s less expensive or less risky for insurance companies in the wealth management space.”

Consumers are also initiating change, as they increasingly demand more wealth management products. “It’s fitting the companies’ strategies as far as de-risking, but I think it’s also the consumer demand around wealth management,” Giguere says.

And advisors are doing their part, too – many financial advisors are advocating a prominent place for life insurance in a broader financial plan.

“We are seeing brokers and advisors look at things more holistically, where they look at coverage for insurance and wealth and savings,” says Nazir Valani, a senior actuary at KPMG.

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www.wealthprofessional.ca

SEG FUNDS GAIN MOMENTUM Increasing numbers of the dually licensed are ditching mutual funds and focusing on segregated funds to minimize the impact of CRM2 – that’s the buzz, at least.

“I have heard on the street of that practice,” says Chris Dewdney, a financial security advisor at DWL Financial Services, where every advisor is dually licensed. “It’s a major issue. The vested interest of the advisor should be that of the client, not of commission. I don’t agree with it. The majority of the industry would not agree with it. But the reality is it’s happening, and it will probably continue to happen.”

The regulatory changes that are coming in July 2016 will force advisors to disclose mutual fund fees and performance, but CRM2 doesn’t mandate disclosure on fees or product performance in terms of segregated funds. MFDA advisors have long complained that leaving segregated funds off of CRM2 is a contradiction.

Worryingly for insurance advisors, the popularity of segregated funds is on the rise, perhaps drawing more nefarious players. In March 2015, overall net assets in segregated funds reached $113.1 billion, compared with $104.3 billion a year previously, according to the Investor Economics monthly Insurance Service Advisory report. March 2015 also marked the highest monthly tally of net sales for segregated funds since February 2012, according to a recent Desjardins Securities report.

“First of all, I think segregated funds are a great product,” Dewdney says. “I think mutual funds are a great product.

It really depends on the client and the situation. Let’s not forget that although seg funds have a higher MER, they also potentially provide creditor protection; there are built-in guarantees on the funds, and they also bypass probate and estate. A seg fund could absolutely be the right recommendation, despite the higher fee associated with it.”

The trend of increased segregated fund sales could continue to creep upwards as many investors seek stability in their portfolios. According to a recent Sun Life poll, 98% of Canadians feel it is important to have some form of guaranteed income during their retirement years.

“The people who should be watching this are the dealers, because if you have a number of advisors and you see this practice increasing, then you’re going to have to reprimand those individuals and be proactive,” says Dewdney.

“It’s less expensive or less risky for insurance companies in the wealth management space” “They want to provide both, so the insurance companies are reacting to this. Definitely there is a move [toward], ‘Let’s sell insurance, and let’s also get into the wealth management business.’”

Some advisors were ahead of the curve in this regard, but the majority will have to play catch-up to be able to effectively offer what consumers want and insurers are offering.

“There were some advisors who were doing

life insurance and wealth management, but they were really specialized in one or the other,” Giguere says. “But I think what’s happening [now] is people who have been focused on life insurance for a long time are now having to retool and really change how they approach their customers, because the conversation between wealth management and life insurance is very different.”

INSURERS’ INTEREST IN WEALTH MANAGEMENT

Manulife

Sun Life

Great-West Life

ACQUIRED

ACQUIRED

ACQUIRED

Canadian-based operations of Standard Life New York Life Insurance Company’s Retirement Plan Services business

Ryan Labs, a fixed-income focused firm that invests on behalf of pension funds and institutions Started a third-party asset-management arm in 2014

JP Morgan Retirement Plan Services

$1.1 trillion

$691 billion

$734 billion

Total assets under management, up 40%

Assets under management, a 9% increase and 25th consecutive quarter of record AUM

Assets under management, up 15%

$207 billion

“When completed, these transactions will each accelerate our strategy to grow our wealth and asset management businesses around the world” Donald Guloien, CEO of Manulife

“We’ve had a great start in Canada with the launch of Sun Life Investment Management’s private asset class funds and LDI strategies, and the [Ryan Labs acquisition] is the next step in our growth. The transaction is also a perfect fit within the asset management pillar of Sun Life Financial’s four-pillar enterprise strategy” Steve Peacher, president, Sun Life Investment Management, and CIO, Sun Life Financial

JP Morgan Retirement Plan Services assets under management

“We’re looking towards acquisition opportunities – the pension space and asset management space are areas where we’re interested” Paul Mahon, CEO of Great-West Life

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FEATURES

COVER STORY: BIG IDEAS 7. TFSAs Once given the short shrift by advisors, the lowly TFSA is moving into the big leagues thanks to the increase in contribution room. But has it eclipsed the RRSP as the impetus for the investor-advisor relationship?

WHEN THE TFSA was first introduced to the Canadian marketplace, it was derided as a tool that wouldn’t make much of a difference. That quickly changed when the government increased the contribution room from $5,500 to $10,000 annually, vaulting the TFSA into the big leagues.

“The TFSA has now become a contender for the best individual tax-sheltered investment account in Canada, a title long held by the venerable Registered Retirement Savings Plan [RRSP],” says Robyn Thompson, advisor and president of Castlemark Wealth Management.

In fact, a recent poll from CIBC found that 27% of Canadians plan to contribute more annually to their TFSA following the federal government’s decision to increase the annual contribution limit – and 4% have already topped up their account to the full $10,000 limit.

“It’s encouraging to see that Canadians are well aware of the increased TFSA limit, and that some are focused on increasing their contributions, though not everyone is able to,” says Veni Iozzo, senior vice president of deposits, GICs and client solutions at CIBC. While the increase in contribution room doesn’t mean the TFSA will replace the RRSP, it does make it more compelling as a retirement tool. Moreover, it is providing advisors the lead in to talking to prospective clients – not unlike the RRSP traditionally has.

“You can withdraw the money whenever you want – or leave it in the TFSA to grow even more,” says Thompson, echoing the initial conversations advisors are having with younger clients in that first, all-important consultation. “That means no messy ‘maturity’ deadlines or RRIFs to worry about, and no residual tax effects. The money is yours, ‘free and clear,’ to do with as you wish.”

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www.wealthprofessional.ca

Trend in action It hasn’t taken long for advisors to see that the increase in TFSA contribution room can be a boon for their clients.

“Without a doubt, in my small business, I’m reaching out to every client who has a non-registered account that’s maxed to increase their TFSA room,” says Matthew Bishop, an advisor at Bishop Wealth Management.

Unsurprisingly, wealthy individuals stand to gain the most.

“High-net-worth clients stand to reap the most benefit from increased TFSA contribution limits,” says Robyn Thompson, president of Castlemark Wealth Management. “These clients have the best ability to maximize contributions and begin the process of tax-free compound growth immediately. In addition, such clients would benefit immensely from the

fact that TFSA withdrawals at retirement are immunized from the OAS clawback.

Clients quickly see the advantage of the increased TFSA contribution room when I demonstrate with a graphic example of what they can expect.”

While many advisors and pundits point to the increase in contribution room being particularly good for wealthy clients, savvier advisors are using it as a first point of contact with young Canadians.

“I think [the TFSA] should be the first call to action for most young people,” Bishop says. “A medical student or a practicing lawyer who’s just starting out ... once they make these bigger incomes, they’re going to get way more bang for their dollar, even if they transfer their TFSA into their RRSP. At that point, they’d be better off in a lot of cases than they would contributing early.”

EXAMPLE: HOW THE TFSA INCREASE CAN BENEFIT CLIENTS Investor: a 40-year-old making $80,000 per year; already has $35,000 in a TFSA Now contributes $10,000 at the start of each year until he retires at age 65 Combined investments inside the TFSA earn an average annual rate of return of 8% By 65, the investor has accumulated $1,000,000

“It’s encouraging to see that Canadians are well aware of the increased TFSA limit, and ... are focused on increasing their contributions”

8. THE FAMILY OFFICE It’s a model that was created at the very top, and it’s now flowing down the hill to advisors who are servicing high-net-worth clients outside of those families with billionaire legacies FAMILY OFFICE

Trend in action The idea of a ‘family office,’ where an entire family’s wealth is managed by a single firm or entity, goes back centuries, but the modern incarnation is typically a multi-family office, in Adam Doering, The which financial advi- Waterfront Group sors are essentially the quarterbacks who coordinate the activities of clients’ other advisors and assist in tackling any financial issues that touch the whole family.

The family office Dan Wynnyk, The is a nascent business Waterfront Group model in Canada, but it’s been growing as more entrepreneurs and executives in this country reach an age and wealth level that makes them open to a new approach to asset management.

According to a global wealth study by Boston Consulting Group, in 2013, Canada ranked seventh in global ‘ultra-high-networth’ households, meaning those with assets exceeding $100 million.

The Waterfront Group of CIBC Wood Gundy, founded in 2000 by Adam Doering and Dan Wynnyk, has moved closer to being a true family office during the past year after reducing their number of clients – “so that we are able to spend a much greater amount of time on each relationship, which is what we want to do,” says Doering.

If they don’t meet the criteria to qualify as a true ‘family office,’ Doering says that’s OK, pointing out that the concept of a family office is really just wealth management, and

what The Waterfront Group does for its clients is much more encompassing.

Doering says conversations he’s had with family office practitioners in Canada recently “were real eye-openers.”

“When I asked them what they do, they said they manage money. All they’re doing is due diligence on the managers and reporting. I said to myself, ‘We’re more of a family office than you are, and you’re the ‘family office.’”

Doering and Wynnyk, along with their team, believe the most successful wealth advisors are going to be ones who do more than just trade stocks. “Our value is in recognizing that our clients are busy, and finding out what’s important to them and helping to make it happen,” Doering says.

“We want to be the best listeners who have ever sat down in front of our clients.”

The Waterfront Group’s process identifies planning opportunities and recommends wealth, tax, credit and estate strategies in the context of a cohesive plan that they then help to implement and monitor.

They do this by collaborating with clients’ accountants, attorneys and other trusted professionals to help to coordinate a team approach that meets all of their clients’ financial objectives and ensures that no detail is overlooked. If a client requires additional resources, The Waterfront Group can make introductions from their network of professionals, Doering adds.

While The Waterfront Group’s model may be an adaptation, Doering believes their version of a one-stop shop is unique.

“The better we get at it and the more people we talk to, the more we realize how few people operate like us.”

OLD MODEL Financial advisor Lawyer Client

Accountant Insurance Tax planning Estate planning

NEW MODEL Lawyer Accountant Financial advisor

Insurance Tax planning Estate planning

“Our value is in recognizing that our clients are busy, and finding out what’s important to them and helping to make it happen”

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FEATURES

CHARITABLE GIVING

Making charity count There are clients who want to give more than a monthly charitable donation, but what vehicles do they need? With the added incentives in the 2015 federal budget, knowing the most tax-efficient way to help them share the wealth is key

THE SPRING budget created tax savings for those making charitable donations – and those savings are not to be sneezed at, says Mark Blumberg, a lawyer from the firm Blumberg Segal LLP who focuses on charity law and charitable giving. And investment advisors should be bringing that newfound leverage to the attention of their clients.

The federal plan will allow individuals who’ve sold Canadian real estate or private company shares to make a donation to a

especially helpful for those who are looking to make a substantial donation to a charity. It also will provide the impetus for people to set up a private foundation, or a donor-advised fund, after they’ve sold their private company shares or real estate.

“What it really means,” he continues, “is that if someone has purchased or set up a company and paid a dollar for the shares, and now the company is worth $100 million, if they were to take the $100 million and put

“For some people, philanthropy is really important, and advisors shouldn’t be afraid to bring it up” Mark Blumberg, Blumberg Segal LLP charity within 30 days of the sale, thereby avoiding capital gains tax on the portion of the money donated to charity.

“This will be very beneficial to those who are interested in making a donation to a charity, who own real estate or private company shares,” Blumberg says. “It will be

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it all into charity, the tax savings to them would be about $65 million, depending on the province.”

Altruism plus Planned giving, done with the guidance and advice of a financial advisor, can in

certain circumstances allow not just wealthy individuals, but also those with average financial resources, to achieve larger gifts than they ever thought possible and to make a great difference in the world in which they live.

“For some people, philanthropy is really important, and advisors shouldn’t be afraid to bring it up,” says Blumberg, adding that it does, in fact, help to produce a much better relationship with the client.

“If their wish is that their estate should go to a charitable institution, then you want to help them with that,” he adds. “When it comes to those involved with wealth management, they should be thinking in terms of the philanthropic side. It can be very important in terms of cementing the relationship between the advisor and their client.”

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Andrew Sheppard, a financial advisor with Sun Life Financial in Toronto, says it’s important to begin building a client’s planned giving wishes into a financial plan as soon as possible, so as not to sacrifice their current lifestyle.

“Once I know that planned giving is one of the client’s goals,” he says, “then from there we have to build it into their financial plan because we want to make sure they are doing it in the most intelligent manner possible, and that they’re not sacrificing their quality of life or retirement, or putting themselves into a vulnerable position because of their planned giving.”

Ways to give One of the crucial aspects of this type of planning is for clients to do their due

MORE THAN JUST A TAX BREAK The vast majority of Canadians give to charitable causes – but very few of the nation’s wealthy give because of the tax incentives. The GIV3 Foundation, in partnership with Canadian Association of Gift Planners [CAGP], BMO Harris Private Banking and Philanthropic Foundations Canada [PFC], examines the charitable giving behaviour and motivations of Canadians with investable assets of at least $1 million, as well as the professional financial advisors who work with this group.

“Most donors are motivated by emotional considerations such as their desire to impact the community (55%), to give back (50%) and their passion for a cause (32%),” says John Hallward, chairman of The GIV3 Foundation. “Fewer wealthy Canadians – 21% – say they are driven to donate because of the tax incentives.”

According to a recent report that studied the role of financial advisors in the philanthropic decision-making of wealthy Canadians, “the incidence of such conversations is low, with only 13% of those interviewed reporting they had engaged in any philanthropic discussions with their advisors,” Hallward says.

Having advisors play a role in encouraging philanthropic donations is crucial to charitable organizations, he adds. “Advisors can add significant value to their clients by helping to create a philanthropic plan that aligns with their values, and identify legitimate organizations that are making a difference,” he says. “This will, in turn, help to provide peace of mind and ensure their clients’ charitable dollars are being used effectively.”

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FEATURES

CHARITABLE GIVING

LEVERAGING THE PHILANTHROPIC CONVERSATION FOR EVERYONE’S BENEFIT Insights from a unique Canadian study indicate that a meaningful philanthropic discussion leads to: Better business for financial advisors

91%

Affluent people who are already giving to charity are motivated mostly by their impact and emotions (more so than tax breaks)

More satisfied business clients

of advisors say they discuss philanthropy with their affluent clients, but only …

55%

TO IMPACT COMMUNITY

Advisors and affluent clients agree that having the philanthropic conversation helps strengthen their relationships

13%

50%

TO GIVE BACK

… of affluent clients say they are having any meaningful conversations

32%

PASSION FOR A CAUSE

21%

REDUCE TAX

Advisors should feel comfortable initiating a conversation about charitable giving and do it earlier than they think

SUGGESTED CONVERSATION-STARTER:

“What are your philantrophic passions and values, and how would you like to plan your affairs to pursue them?”

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FINDING THE RIGHT CHARITY After the recent tragedy in Nepal, people have been donating thousands of dollars in relief to the earthquake victims in that country.

But for those looking to get the most bang for their buck, choosing a nonprofit can be a bit of a gamble.

One company, Charity Navigator, identified 11 nonprofits that have a three- or four-star rating and allow people to designate their donations to go specifically to Nepalese earthquake victims.

“You need to do your homework,” Sandra Miniutti of Charity Navigator told NBC News. “We are working on how to evaluate charities based on their impact in our ratings methodology, but we think that if a charity is in good financial shape and is transparent, it will have the resources to carry out its mission well.”

Another rating company, BBB Wise Giving Alliance, identified 37 charities that met its 20 standards for charitable giving for Nepal earthquake relief.

diligence on the charities and organizations they are planning to donate to, ensuring that the donation is producing the benefit the client intends.

“My job is to recommend the most tax-efficient way to pass on whatever cash flow is left over to the intended receiver of the gift,” says Sheppard, adding that the ways to vouchsafe that gift can include bequests in wills, transferring or donating life insurance policies, setting up private foundations and donoradvised funds at a community foundation, or setting up charitable remainder trusts [CRTs].

Each has its advantages and disadvantages, but it is at this stage that advisors should expand the team to include estate lawyers and accountants, and the advisor

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“We want to make sure our clients are giving in the most intelligent manner possible, and that they’re not sacrificing their quality of life or retirement” Andrew Sheppard, Sun Life Financial should take on a ‘quarterback’ role.

One tax-friendly option that should be presented to the client who is looking to make a large donation to charity is to suggest making several major gifts throughout their lifetime, Blumberg advises.

“With a bequest, you can only reduce taxes for the donor’s income in the preceding two years,” he says. “You can get a slightly better tax impact and you can give more money to charity if you give away money earlier and use the gifts to offset taxes.”

One of Blumberg Segal’s projects is the websites CanadianCharityLaw.ca and GlobalPhilanthropy.ca, which provide legal services and advice to nonprofits and charities that operate in Canada.

“Our firm believes that, irrespective of size and budget, legal compliance and ethical conduct on the part of charities, is important to maintaining the public’s trusts in the charitable sector,” Blumberg says.

Blumberg Segal also has an institute that brings together 12 speakers to cover the different legal and compliance issues affecting charities and nonprofits in Toronto.

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PEOPLE

ADVISOR PROFILE

Not your ordinary practice An unconventional approach to wealth management has allowed this father-and-son duo to build close relationships with their clients for a thriving practice

WAYNE AND JAMIE Townsend aren’t operating your average wealth management practice. In fact, the father-and-son duo at Lawton Partners, a Winnipeg-based multi-service office, could well be mistaken for therapists. Indeed, they routinely are.

“Ultimately I think we’re having conversations with people that they’re not able to have with many others,” says Jamie, pointing to both his and his father’s relationships with clients. “The conversations we’re having are sometimes sensitive. There are very few people in this city or this world that they can have those conversations with at that deep a level.”

Their strategy comes down to two key elements: time and trust.

Listening to the Townsends describe it, you can almost imagine their clients lying on a couch during their meetings. “To Jamie’s point, a client can’t go share the fact that his marriage is falling apart,” says Wayne, “or he’s overdrawn at the bank, or his kids are going to university and he doesn’t have enough money to fund it. When you have that kind of deep relationship with clients, they will tell you things they haven’t shared with anybody else.”

In order to really help clients use their money effectively, the Townsends insist on knowing whether that money is being squirreled away for emergencies, perhaps, or for retirement. “You really have to spend a lot of time with these clients figuring out where they’re at and what can throw them off,” Wayne says. “We always say that money really creates confidence, and it creates options, and our

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role is to ensure clients have cash available whenever it’s needed.

Every step along the way, we’re there to help them protect their confidence. When you know that, then the money discussion is easy.”

But they rarely talk about money – they estimate that subject takes up only 20% to 30% of their time.

“With us, it’s the last part, because our whole focus is trying to understand where the client is and whether they’re on track to reach their goals,” Wayne says. “Once we know that, then the question becomes, ‘What can derail those goals from happening?’ If you don’t know that, then you can’t talk about money. Money is the easy part of what we do.”

Even the metric most advisors use to measure success is irrelevant to them.

“A lot of advisors might get hung up on what was your rate of return last year,” Wayne says. “Frankly, if you don’t have any money when it’s needed, then it doesn’t matter what your rate of return is.”

“A lot of advisors might get hung up on what was your rate of return last year. Frankly, if you don’t have any money when it’s needed, then it doesn’t matter what your rate of return is” Team players While the Townsends can offer clients that close-knit bond and expert wealth management advice, they’re also able to call on the full power of Lawton’s 50 other professionals. “One of the challenges that our business owners or professionals are having is getting everyone in a room on their team – not only just us, but the accountants and the lawyers,” Jamie says. “We can address the issue once and move forward. It’s been incredibly valuable.”

They have at least one meeting a year with the full team and exchange emails throughout the year.

For example, on April 30, everyone associated with a client gets a copy of their tax return. “Now we can identify if he’s making too much money, is he paying too much tax, is there something they could have missed?” Jamie says. “Then we work with the accountant and identify challenges and opportunities, then collectively, you can go back to the client and present a solution. There’s just no resistance when you do that.”

Not only do they work with other professionals, but they

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5/06/2015 10:08:36 AM

PEOPLE

ADVISOR PROFILE

also involve the client’s family. “I think one of the things that makes Wayne and I unique is that it’s really a multigenerational approach,” Jamie says. “The conversations we’re having are with the parents and the kids to make sure that all avenues are taken care of.”

Given the amount of time that goes into developing these types of relationships, the Townsends are very disciplined about the clients they take on. “You cannot build a practice by [continuously] adding people,” Wayne says. “I can’t add enough value to somebody who makes a smaller income and can save $120 a month. The tendency in our industry, especially those who started with an insurance company background, is that more is better. More is better only to a point.”

In fact, 85% of their clients have been with them for longer than five years, and all their new clients in the last couple of years have come from referrals. “If a client, lawyer or accountant is saying, ‘We think you’re a quality person, and we think there’s some tremendous value that we can help you with,’ that conversation is completely different than talking to someone on the street or talking to a friend,” Jamie says.

Embracing transparency Given the Townsends’ attitude toward the client relationship, it should probably come as no surprise that they don’t look at CRM2 as the big challenge many in the industry see it as. “I would say it’s the big opportunity in our industry today,” Wayne says. “If you’re sitting in the bushes, and you’ve only seen that client once every three years

“You cannot build a practice by [continuously] adding people.

The tendency in our industry ... is that more is better. More is better only to a point” and collect your trailer fees and haven’t done anything to add value, I think [you’re] are at serious risk of losing those assets.”

The Townsends have been getting out in front of the new regulations. In fact, they’ve been doing so for years – every meeting with clients includes a section in the agenda called ‘Understanding Your Investment Fees.’ “For every client, we show them exactly how we get paid, what they’ve paid as a percentage of the assets and exactly what that translates into in dollars and cents for their account,” Wayne says. “It’s amazing how great a conversation that is when it’s trans-

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THE VIEW FROM THE ‘PEG While the rest of Canada is on a roller coaster ride of economic volatility, advisors in Winnipeg are chugging along as usual.

“Winnipeg is like vanilla ice cream,” says Wayne Townsend.

“It never goes out of style or out of flavour. Winnipeg never surges, and it never tanks – solid, steady, conservative growth.”

But the issues facing both clients and advisors in this Prairie town are similar to what’s going on around the country. “The conversations we’re having with clients focus on the pressures of time and the pressures of owning a business and the impact of some of the decisions they need to make not only for today, but how that plays out over generations,” says Jamie Townsend. “Those conversations are probably frequent across the country, and I’m not sure they’re just unique to Winnipeg.”

That solid, steady, conservative growth extends to other aspects of the city, including its hockey team. “Don’t be going there,” Wayne says. Too soon, it seems. parent for the clients. They appreciate it if you have created value.”

Also, when fees are broken down for clients, it can give rise to questions about why, for example, they’re paying 1.2% for product A and 2.3% for Product B. “It’s a great conversation to have with your client,” Wayne says. “What we’re seeing is clients who want to do more consolidation and own a more concentrated portfolio. At the end of the day, they’re paying lower fees today than they were paying two or three years ago for a portfolio that has been built to a higher standard.”

The way the Townsends operate their practice, they wouldn’t recommend solutions for clients based on products anyway. “None of this is product-driven; it’s all strategy and solution driven,” Wayne says. “If you take the time to properly understand where the clients are, the products will just naturally flow. We put a lot of time in upfront making sure we understand what’s important to the client and then covering off the risks.”

Given that their practice is based on understanding the importance of time in a relationship, the value trade-off is paramount for them. “There’s no sense in working 80 hours a week and then dropping dead,” Wayne says. “You want to give the absolute best value you can create to a client, as long as it’s not taking away from you having to sacrifice your personal and family time.”

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FEATURES

GIVING BACK

Teaching a man to fish, financially A coaching pilot program designed for low-income individuals brings the industry’s financial expertise to a segment of the population most in need

From left to right: Hon. Kevin Sorenson, minister of state (finance), Government of Canada; Florence Brake, financial literacy coordinator and trainer, Causeway Work Centre; Margot Sunter, board president, Causeway Work Centre; Elizabeth Mulholland, CEO, Prosper Canada; Linda MacKay, senior VP of retail savings and investing, TD Bank Group; Jane Rooney, national financial literacy leader, FCAC. (CNW Group/ Prosper Canada)

A HAND up, not a handout – it’s the concept behind a new pilot program by Prosper Canada that offers free financial coaching for people living on low incomes in Toronto.

More important, it tackles the perception that only the middle class and wealthy need financial advice, says Carol Lynde, president and COO of Bridgehouse Asset Managers, who helped to initiate the program.

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“All Canadians benefit from access to expert help in building a financial plan and tackling financial challenges,” Lynde says.

“Through this program, the investment industry is helping to make sure that people who might not normally receive this help can get the expert support they need to build a stronger financial future.”

National charity Prosper Canada, the City of Toronto, a consortium of leading

investment companies and three financial planning professional associations are the key players in the initiative, known as the MPower Money Coaching Program.

The pilot program is funded by a consortium of companies, including Bridgehouse Asset Managers, Dynamic Funds, Franklin Templeton Investments, IA Clarington Investments, The Investment Funds Institute of Canada, SunLife Global Investments and Zavitz Insurance.

The program will be delivered through three City of Toronto employment centres, and will help participating individuals who are on social assistance and/or seeking employment to identify, plan for and achieve personal financial goals, supported by volunteer professional financial planners trained to provide financial coaching to people with low incomes.

For advisors, it is a chance to give back by donating the wealth of their knowledge, says Elizabeth Mulholland, CEO of Prosper Canada.

“They believe in the value of financial planning,” Mulholland says. “Many financial planners want to give back to their communities, like many Canadians, and this is a great opportunity to do that.”

Having engagement from the financial community in helping those in low-income brackets is crucial, says Mulholland, adding that everyone at every level needs to step up and do their part.

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“Certainly I think there is value for the investment sector partners that we have. In solving complex problems like poverty, we need all sectors at the table” Elizabeth Mulholland, Prosper Canada “Certainly I think there is value for the investment sector partners that we have,” she says. “I would think that, in solving complex problems like poverty, we need all sectors at the table.”

Financial coaching has been proven in the United States to help people living on low incomes to build their financial capability and improve their financial well-being over time. The MPower Money Coaching Program will explore the feasibility of mobilizing professional financial planners to serve as volunteer financial coaches in the Canadian context.

HELPING LOW-INCOME CANADIANS FINANCIAL COACHING WORKS Financial coaching is a proven intervention that helps low-income families adopt financial attitudes and behaviours that lead to improved financial well-being over time. In a two-and-a-half year pilot in 17 US states run by the Citi Foundation and Neighborworks America: • 55% of clients with unsecured debt decreased their debt amount ($3,005 median decrease) • 54% of clients with no savings achieved some savings ($668 median savings) • 47% of clients increased their credit scores (59-point mean increase) THE CASE FOR FINANCIAL EMPOWERMENT Disturbingly, financial vulnerability has been on the rise in Canada for some time: • Canadians have the highest debt-to-income ratio in the G-7 countries at 163.3%

Program goals Since 2010, the Prosper Canada Centre for Financial Literacy has trained more than 2,000 community workers from over 800 organizations and First Nations communities across Canada to deliver tailored financial literacy education to people with low incomes. Those trained showed significant improvement in financial literacy knowledge, skills, confidence, networks and access to resources.

The Centre continues to build the capacity of trainees through its website, which offers more than 100 financial literacy education and evaluation resources in diverse languages.

According to Mulholland, the MPower Money Coaching Program’s goals over the next year are to provide 50 financial advisors with the opportunity to use their skills to give back to their community, and enable 100 low-income participants to: • Set a financial goal or goals • Develop a financial action plan

• Nearly 1 in 6 Canadian families have a net worth that is either $0 or negative • Nearly 1 in 4 Canadians have no financial wealth at all (including savings, stocks, bonds, RRSPs) • Canada’s household savings rate, while rising, remains very low at 3.6% OTHER SUCCESSFUL PROSPER CANADA INNOVATIONS • The Self-Employment Benefit program, developed in the 1980s, was built into Canada’s Employment Insurance system in 1992, making it available to unemployed people across Canada. Today, 9,000 Employment Insurance recipients annually use the program to launch successful new businesses.

• Learn$ave, a pioneering $30 million, nine-year demonstration project, contributed to the creation of the federal Canada Learning Bond and Canada Education Savings Grant that, together, have provided low- and modestincome families with more than $1.8 billion for their children’s education.

• The Independent Living Account program has enabled 182 homeless shelter residents to build the money management skills and savings they needed to successfully transition to permanent housing and to reduce the risk of becoming homeless again by 50%.

• The Prosper Canada Centre for Financial Literacy, co-founded and supported by TD Bank Group, has equipped 2,066 frontline community workers from 807 organizations and First Nations communities across Canada to deliver high-quality community financial education tailored to the needs of low-income and vulnerable Canadians.

• The TD Financial Literacy Grant Fund, managed by Prosper Canada, has awarded $10.4 million to 140 community organizations across Canada for community financial literacy education.

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FEATURES

GIVING BACK

• Get help filing their taxes if they need it • Build a personal/household budget • Increase their savings • Reduce their debt • Improve their credit score “This is a unique collaboration, with partners from all sectors working to ensure everyone has access to neutral, high-quality help with their finances when they need it,” Mulholland says. “Collaborations like this are the key to achieving our goal of ensuring all Canadians are financially capable and have access to the financial products, services and advice they need to prosper.”

A bonus that comes with the program is

removing the intimidation factor for many of those in low-income situations who try to engage the financial community.

“They also have varying levels of financial literacy – but low income doesn’t necessarily equate to low financial literacy or high income with high financial literacy,” Mulholland says. “The technical vocabulary around financial matters can also be very challenging for people – at any income level.

“I think in Canada, particularly in urban areas,” Mulholland continues, “because we have so many newcomers, there may be an additional language barrier on top of that.

And for those with less education, there may

be literacy or numeracy barriers.”

Financially vulnerable households The program is timely, given that nearly one in six Canadian families has a net worth of $0 or less, and nearly one in four has no financial savings or investments at all. Currently, there are few sources of trained and qualified support available to people on low incomes seeking help to manage financial problems and build a sound financial plan for their future.

“People living on low incomes don’t have access to quality financial planning support, and they don’t have a lot of money to invest,”

FINANCIAL EMPOWERMENT FRAMEWORK

1 Financial information,

assessing 2 Help income-boosting

education and counseling

and 3 Safe affordable

to 4 Access savings and

financial products and services

benefits and tax credits

asset-building opportunities

5 Consumer awareness

and protection

INCOMES FOR FAMILIES VS SINGLES (BY PROVINCE) AFTER-TAX MEDIAN INCOME IN 2012 ($) 100,000 Families

75,000

Singles 50,000

25,000

0 Nfld.

PEI

NS

NB

Que.

Ont.

Man.

Sask.

Alta.

BC Source: Statistics Canada

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Mulholland says.

What the financial coaches will do, says Mulholland, is work with their clients, assess their financial situation, identify their financial goals and work with them to form an action plan around those goals.

“Typically in financial planning, you are helping people put money aside and to make wise investment decisions,” she says. “In the case of people who have low incomes, often it’s more about basic money management. And it is a very client-centred approach: What we are trying to do is build people’s financial capabilities, and not make them dependent on other people to make decisions for them. It is really about teaching people how to fish, rather than handing them a fish.”

Volunteers from the financial planning community are being recruited with the assistance of three professional associations – Advocis, the Financial Planning Standards Council and Independent Financial Brokers of Canada.

Removing stereotypes It may come as a surprise that Canadians with low incomes are less likely to be indebted than Canadians overall, and those with debts are likely to have a much lower amount of debt, says Mulholland. “That’s because they are cognizant that they are less able to get out of debt because they are living quite close to the bone. Some do have debts, but not at some of the same rates others would have.”

The buy-in from the financial and investment sector shows that they see the value of the program in helping those who are financially vulnerable to take control of their financial lives, Mulholland says. “They see the growing complexity of the financial marketplace and the decisions that consumers have to make. And they know that, even with a high degree of financial literacy, there are challenging decisions to make in an informed and optimal way.”

A SNAPSHOT OF LOW-INCOME CANADIANS The 2012 Survey of Labour and Income Dynamics [SLID] revealed some trends about those living on low incomes in Canada: POVERTY Nearly five million Canadians were considered low income in 2012. That equates to 13.8% of the country’s population, or about 4.7 million people. The numbers are based on the after-tax low-income measure, where households are considered low income if their collective earnings are less than half of the national median income. The low-income threshold for a family of four is $41,568. (While not comparable, the 2011 SLID showed 3 million Canadians, or 8.8% of the population, were considered low income based on the cut-off measure for that year.)

About one in six children in the country, or 16.3%, lived in low-income status in 2012. Levels are much higher for kids living with single mothers – around 44.5%.

For seniors, the low-income incidence was 6.2% for those who lived in families; and much higher – 28.5% – among those living alone.

SINGLE PEOPLE Single people are much more likely to have low-income status. Median aftertax income was just $27,300 for single people in 2012.

Other national data, including food bank and social assistance statistics, also confirm that singles are a growing segment of Canada’s poor.

The picture varies by province. Single Newfoundlanders have the lowest median after-tax incomes at $22,100, while those in Alberta have the highest at $36,500.

MEDIAN INCOMES Median after-tax income for Canadian families of two or more people was $71,700 in 2012; those in Ontario, Saskatchewan, Alberta and British Columbia all saw higher-than-average incomes. Those in New Brunswick had the lowest at $59,300.

Among senior families (or those where the highest income earner was over the age of 65), the median income was $52,300, compared with $76,900 among non-senior families.

For families with two parents and kids, median after-tax income was $84,600 – much higher than among families headed by a single mother, where the median was $39,100.

Families in Alberta had – by a wide margin – the highest after-tax median income in the country at $92,300. Albertan families also had the highest median market income, which includes earnings, pensions and investment income, at $102,700. However, this may have changed more recently amid steep declines in the stock market and in energy prices.

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PEOPLE

PORTFOLIO MANAGER

It’s all about the team Loomis Sayles has partnered with IA Clarington, bringing with it a team approach keenly focused on the thriving equities market

BEING PART of a team is the guiding philosophy at Loomis Sayles, so it should come as no surprise that one man with a military background is helping to steer the ship – much like he did during his days with the Coast Guard.

“In the military you work on a lot of teams, so the team on the bridge is important to you when you are a deckwatch officer,” says Lee Rosenbaum, co-manager of the Global Equity Opportunities Fund for Loomis Sayles. “So is the team in the small boat when you are doing a boarding, and that is very similar to how we manage money here at Loomis Sayles – with very focused teams that are dedicated specifically to individual products, with a lot of trust and camaraderie.”

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“At Loomis Sayles, there is not a ‘final decision maker.’ It is truly a team decision that comes together based upon all of us being immersed in the research platform ...”

Lee Rosenbaum, Loomis Sayles For Rosenbaum and Loomis, the current mission is to generate wealth and alpha for the client.

Key team players include portfolio managers Daniel Fuss, Dave Rolley, Eileen Riley and Rosenbaum. But more important, says Rosenbaum, is the mechanism of how they come together to work, which is crucial

to the process.

“What is really most important about how we are getting together – and the investment decisions that are coming together – is that each of us is immersed in the fundamental research platform at Loomis Sayles. When we work within our smaller groups and teams, we are getting all the views across the

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capital structure. Working with the sovereign analysts, there is a large morning meeting, so when we get together on a quarterly basis, it is very well understood what each of us is already thinking.”

Fuss is the portfolio manager for the US bond portion of the strategy, while Rolley manages the global fixed-income portion of the strategy. Riley and Rosenbaum work together on the global equity portion.

Loomis Sayles investment professionals – who make up more than three-quarters of the company's 700 employees – are divided into 15 sector and macro teams.

“What we’re doing is getting together as a team of four and making a decision as to how to allocate the capital in the fund across these three sleeves,” Rosenbaum says. “At Loomis Sayles, there is not a ‘final decision maker.’ It is truly a team decision that comes together based upon all of us being immersed in the research platform here at Loomis.”

Loomis Sayles has created a technology platform that integrates more than 22 million data points each day, including security, portfolio and market-index-level characteristics, forecasts, analytics, risk metrics, prices, trades and returns, as well as other proprietary research and data.

Rosenbaum sees the recent partnership between Loomis Sayles and IA Clarington as an extension of the team philosophy.

“Loomis Sayles seeks partners where the investment philosophy and process of a specific strategy are a natural fit with a client’s needs and objectives,” he says. “The active, fundamental research process that Loomis Sayles Global Equity and Income Strategy utilizes provides a disciplined and powerful solution for IA Clarington’s clients within a dynamic and evolving investment market.”

Security selection At the moment, the strategy at Loomis has 70% allocated to global equities.

“That’s a decision that Eileen and I are

supportive of, but actually Dan and Dave are equally supportive of that decision,” Rosenbaum says. “They think, as we do, that there is a lot [more] opportunity in global equities right now than there are in US and global fixed-income opportunities.”

In the Canadian market, Loomis sees opportunities in security-specific examples.

“One of the key characteristics of this product is that we focus on securityspecific risk, not market risk,” Rosenbaum says. “And we use our deep fundamental research platform to uncover opportunities that we think are specific to an individual business, and can create wealth and alpha for the client.”

Specific to Canada are two securities Loomis is fond of at the moment. “One is in the healthcare sector called Valeant Pharmaceutical; the other one is an IT

consulting company in the technology sector called CGI,” Rosenbaum says.

To select securities, Riley and Rosenbaum measure every business against three alpha drivers.

“The first is the business has to be a quality business; to us, that means having or creating a sustainable competitive advantage,” Rosenbaum says. “Secondly, it needs to show the ability to grow intrinsic value over time. For us, that means a focus on the ability to generate and grow free cash flow.”

The third alpha driver is valuation, which means developing three scenarios.

“We call it our ‘scenario analysis framework,’ or three stories of how we think a business will unfold over time,” Rosenbaum says. “We use discounted cash flow to do that.”

WHO IS LEE ROSENBAUM? Lee Rosenbaum is a vice president at Loomis, Sayles & Company and co-portfolio manager for the Loomis Sayles Global Equity Strategy and the Loomis Sayles Global Equity and Income Fund.

But before he slipped into a three-piece suit, he was slipping in and out of the waters of the Caribbean for the US Coast Guard.

“I served as an officer with the United States Coast Guard for five years, and performed drug interdiction and search and rescue missions in the Caribbean for four out of those five years,” he says. “I picked up a lot of Haitians and Dominican national refugees out of water, and stopped drugs from entering the country.”

After his time in the Coast Guard, he and his wife, Judy, moved up to Massachusetts, where he enrolled in business school. Rosenbaum already had a BS with honours in civil engineering from the United States Coast Guard Academy, where he reached the rank of lieutenant; in Massachusetts, he earned an MBA from the Sloan School of Management at the Massachusetts Institute of Technology.

But did a resume that includes drug interdiction and saving refugees prepare him for Loomis Sayles?

“When I was on ships, I was a deckwatch officer, so I actually drove the ship,” he says. “I thought a lot about risk as an officer, and there is a lot of information you have to keep track of when you are on the bridge of a 270-foot ship with a helicopter. It’s not the same line of work as being in the money management industry, but it is from the perspective of risk, being on a team and keeping track of a lot of different pieces of information.”

Rosenbaum joined Loomis Sayles in 2008 as a senior global equity analyst for the firm’s central research group. He has covered the industrial, materials and financial services sectors. Later joining the global equity team as a dedicated product analyst, Rosenbaum was promoted to co-portfolio manager in 2013.

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PEOPLE

PORTFOLIO MANAGER

Those scenarios include a base scenario of what they think is most likely to happen, as well as a downside scenario that takes into account the risks in investing. The third, upside scenario is based on Loomis’ experience in dealing with quality companies, and not wanting to sell a winner too soon.

On the equity side, one of the things that Loomis Sayles has been spending more time on is Europe.

“We think that these are times where Europe is starting to stabilize, we’re seeing some end markets bottoming out – so we’ve been spending more time on that region of the world,” Rosenbaum says.

What forces are shaping the equities market today?

“I think the forces are all intertwined,” Rosenbaum says. “You’ve got significant quantitative easing in several major parts of the world. You’ve got QE in Europe, you’ve got QE in Japan, and we’ve had significant QE in the US. We’ll just have to wait and see what happens to interest rates moving forward.”

The result has been very low interest rates globally, he points out, which, coupled with the improvements in a number of areas around the world, have led to very significant multiple expansions in the equities market.

“I would say that is a force that is in play today,” Rosenbaum says, “and why we think that is particularly significant to this product and

the partnership we have with IA Clarington and the global tactical income fund is that we’ve had this multiple expansion in price-toearnings ratios – we don’t think, going forward, that investors should expect that to continue to occur. What that really means for us is the ability of a business to increase its earning power over time, and to grow intrinsic value, is very important.”

ASSETS UNDER MANAGEMENT $US billion as of March 31, 2015

AUM BY GLOBAL ACCOUNTS

TOTAL

$240.8

US mutual funds

$95.8

US separate accounts

$87.3

Non-US separate accounts

$42.9

Non-US mutual funds

$14.8

Corporate

$55.7

Public funds

$37.8

Taft-Hartley

$13.6

AUM BY ASSET TYPE COMPANY PROFILE - LOOMIS SAYLES MUTUAL FUNDS

$116.7 billion INSTITUTIONAL

$124.1 billion

CLIENTS Institutional clients in 20 countries VEHICLES Mutual funds, hedge funds, institutional separate accounts, collective trusts

INSTITUTIONAL

$124.1

STRATEGY Employs a fundamental analysis with an opportunistic and bottom-up picking approach to create its portfolios

TOTAL

$240.8 billion in assets as of March 31, 2015

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LOCATIONS Headquarters in Boston, with offices in Chicago; Bloomfield Hills, Mich.; Milwaukee; New York City; Pasadena, Calif.; San Francisco; and Washington, DC

Endowment/foundation

$7.1

Insurance

$5.2

Alternative product

$1.0

Other

$3.7

Loomis Sayles mutual funds $75.7

FUNDS

$116.7

US sub-advised mutual funds $20.1 Non-US mutual funds Wrap funds/other

$14.8 $6.1

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75%

LOOMIS SAYLES AT A GLANCE

$240

250 200

of investment professionals

billion in assets under management

150

are dedicated to investment research and trading

100 50

Loomis AUM ($billions)

0 1991

1993

1995

1997

1999

2001

2003

2005 2007

2009 2011 2013

investing

$88 milllion

in research in 2015

Servicing clients in

20 countries

across

6

Navigating challenging financial markets for nearly

continents

90 years

more than

140

chartered financial analysts

10

1 MISSION to help clients achieve their financial goals www.wealthprofessional.ca

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5/06/2015 10:13:06 AM

FEATURES

WORK/LIFE BALANCE

STRESS: the silent assassin You work long hours and are often tired, stressed and overwhelmed. You just don’t have time to look after yourself. Sound familiar? Timo Topp provides some tips on work/life balance

STRESS IS like a silent assassin. You don’t see it coming or know that it is there, but it has you in a headlock, and before you know it, you’re on the mat. It has been stated that stress is the cause of 90% of illnesses.

Your body tells you how well you are doing. You just need to be more aware of the signals it is sending you. They start off as minor warning signs, but if left unchecked or ignored, they progress to more serious health issues and ultimately life-threatening problems.

You can manage your stress to feel and perform at your best with simple strategies performed on a daily, weekly and monthly basis.

Daily Daily strategies to minimize stress simply mean following the basics of health: • Drink plenty of water and limit coffee to two cups • Be more conscious of better breathing and breathe deeply into the abdomen, not just the upper chest • Eat healthy, fresh food instead of processed, quick, convenience food • Keep active – walk more and move more throughout the day

SLEEP YOUR WAY TO SUCCESS • Develop a sleep routine. Go to

bed at a similar time each night • One hour before bed, avoid

work, computers and TV • Dim lights and/or use candles • Write down thoughts so they aren’t in your head • Sleep in a completely dark room with a window

slightly open for fresh air • Do some deep, meditative breathing • If you cannot sleep, get up, read a book for 15

minutes in a different room and return to bed.

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Weekly Invest a small amount of time in nurturing yourself and prioritizing some downtime: • Exercise three to four times per week for 30-40 minutes • Make a commitment to turn off your phone and emails at a set time each day • Have one complete work-free day, e.g.

Saturday • Make time for friends and family, and make it equally as important as a work meeting • Have a laugh – watch a funny movie or TV show • Get outside into a local park for sunshine and fresh air

PROACTIVE STEPS A new study reveals that stressed and micromanaged employees are more likely to call in sick. The study, which examined more than 7,000 middle-aged healthy people in Norway, found that those who work in stressful environments and are micromanaged by their bosses are more likely to take extended sick leave – defined as more than 16 days off in a row. Additionally, they are also more likely to experience chest pain, nausea and shortness of breath.

According to the research results, one in every 15 cases of extended sick leave could be avoided if employers took steps to make their workplaces less stressful. Examples include: LOOSEN THE REINS: Introduce small measures that give employees some control over their work, such as when they can take their breaks, or even just empower them so they can speak up about great ideas. A fresh perspective, or even taking suggestions from frontline employees, can result in more efficient and effective processes – resulting in less stress for everyone.

PROVIDE SOME DOWNTIME: Setting a time for employees to put down work and interact with each other not only gives them an opportunity to de-stress, it helps develop workplace relationships. For example, when Anthony Merlin, managing director of architectural firm i2C, converted an old pub into his firm’s office, he included breakout areas in the renovations.

Monthly and beyond • Once a month, get a massage/bodywork treatment • Pursue a pastime that is purely for fun as opposed to achieving or attaining something • Once a month, get out into nature for a day to walk on the beach or hike in the woods • Every 90 days, get out of town for a long weekend • Once a year, have a holiday for two weeks or more Schedule your ‘me plan’ The key to managing yourself and handling stress is to prioritize ‘you’ by developing a ‘me plan’. This is a plan that includes a selection of the strategies mentioned above.

Don’t just leave it to chance; book the strategies into your schedule like any other important appointment. If something comes up, reschedule it.

Isn’t that a worthy investment for a significant return?

Timo Topp is founder of Well for Work, which helps busy professionals feel better and work more productively with simple and feasible strategies they can do at their desks. Visit wellforwork.com

EDUCATE MANAGEMENT: Provide team leaders with basic training in identifying the signs of stress. Law firm Holding Redlich is one example of an employer that has positioned employee well-being at the heart of its EVP. The company promotes health and well-being programs for all employees, and hosts regular mental health, stress and burnout presentations.

STRESS WARNING SIGNS

MINOR

MEDIUM

MAJOR

Headaches

Moodiness

Anxiety or depression

Muscle aches

Irritability or short temper

Feeling isolated, unsocial

Forgetfulness

Digestive problems

Behavioural issues

Poor concentration

Frequent ill health

Insomnia

Poor sleep patterns

Ongoing worry

No sex drive

Irritability

Drinking more alcohol

Racing heart rate

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FEATURES

STRATEGY

The brutal truth Stefan Kazakis explains why you need to be accountable for your business and how you are responsible for getting it back on track I AM OFTEN asked the question, “How can I keep both myself and my team accountable?”

Here are my top tips for keeping yourself and your team on the path to success, which will transform your business into a ‘diamond business’.

As you know, running a small business isn’t easy, but if it were, everyone would be doing it. Business owners of today need to be more flexible and plan for the unexpected, set boundaries for their business and home life to ensure efficiency in both areas at the right times, and create a support network around them.

Unfortunately, many business owners choose to operate in an environment of blame and lack of trust, and with a victim mentality.

Keeping a positive mind requires more energy and effort, which is why many business owners decide that blaming everything from the economy to their lack of good customers is the reason for their poor performance.

Stop and think about your business. Do you and your team members have a positive or negative mind? If the answer is positive, you

get a gold star. If the answer is negative, you need to make some decisions about what you are going to do about that. And remember, you need brutal truth. You can pretend you are positive if you like, but the only person you will be fooling is yourself, and that doesn’t help you a whole lot.

Running a business where everyone is accountable can be fun and full of positives, as long as you learn a few fundamentals around mindset, critical thinking and planning.

It all starts with clarity Clarity comes when you feel you are winning.

Clarity is not about dollars and cents, and it’s not about how many clients you have. It’s not about your marketing or your cash flow or your balance sheet. All this stuff comes later.

Clarity is about the DNA of your business.

It’s about what drives you and the people around you. It’s the heart and soul of why you go into the office every day and the promise you make to your customers. It’s an shakeable confidence about who you are and why you do what you do for those that you

“Go slow to go fast. Sometimes you must go two steps backward to go four steps forward, but you must see the opportunities before you and not just the costs” 52

choose to do it for. If you don’t have confidence, trust, self-discipline and someone to keep you accountable, you can’t expect others to.

You’re enrolled or you’re not; you’re serving a purpose or you’re not; you’re maximizing your opportunities or you’re not. You’re at your personal best or you’re not. It’s an ethos, and it’s a culture for you and your business.

Are you clear on what your number-one big outcome is? The quality of the decisions you strategically make will determine the direction of your business. What is your number-one big outcome? For me, it is to

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Being in growth mode means having a strategic plan that is the basis for all the decisions you make.

Go slow to go fast. Sometimes you must go two steps backward to go four steps forward, but you must see the opportunities before you and not just the costs. Focus on the cost of opportunity, not the cost of growth, and be prepared and strategic to take a short-term hit for long-term gain. Business is demanding. It always has been, and it always will be.

Every plan A should have a plan B

provide a better quality of life for my clients.

Notice that it is not based on the dollars and cents; it’s more than that. What is it that you are in business to provide?

Then ask yourself, are you growing or dying? One question I always ask business owners that I meet is, “Are you in maintenance mode or growth mode?” Which of these two do you connect with?

You must look in the mirror and make a conscious choice about this because they are two different mindsets, and whichever approach you take will affect each and every decision you make in your business. If you’re

not clear about which mode you are in, you could be headed for trouble.

You may think you should be in maintenance mode, treading carefully and being conservative until you can get back on your feet, and then you can worry about growth.

But let me tell you something right now: You should always be in growth mode. That’s right, always.

To be in growth mode means you are focused on the future. You should have threeto five-year goals as well as shorter-term targets to ensure you’re on track to the greater destination.

Having decided that you are in growth mode, you must always ensure that every plan A always has a plan B. I always say, “Every problem I am experiencing today started out as a great idea!”

So, when things start to go pear-shaped and your business appears to be going off track, do you start making decisions in a blind panic just to get out of the current mess? This is a great way to relieve the stress of running a business, because if you keep doing this, fairly soon you won’t have a business left to worry about.

Just as important as using your plan to guide your decisions and growth is having a plan B for everything you do. We all know that despite best efforts and careful planning things still go wrong from time to time. All businesses hit speed bumps. It’s inevitable. So whenever you make an important decision in your business, make sure you have a backup plan as well.

When the opportunity moves from the head to the heart, you will move forward.

When you fully own and take responsibility for what you are doing, and when you are totally committed, good things will start to happen.

Stefan Kazakis is a business strategist, soughtafter presenter and speaker and author of the new book From Deadwood to Diamonds. For more information, visit www.stefankazakis.com or email info@stefankazakis.com.

www.wealthprofessional.ca

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5/06/2015 10:18:13 AM

WE FOSTER GROWTH. PORTFOLIOS AND OTHERWISE. When people are given the freedom to act, they grow. When people are trusted and supported, they flourish. When people feel deeply responsible and charged with doing the right thing – you got it – they’re happy. And when they’re happy, their clients tend to be too. If a place that embraces the possible and encourages portfolios to grow by encouraging people to grow first sounds interesting, call John Cucchiella in strictest confidence at 647 428 8225.

Dundee Goodman Private Wealth is a division of Dundee Securities Ltd. Member CIPF. Dundee Goodman Private Wealth is a trademark of Dundee Corporation, used under license.

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PEOPLE

CAREER PATH

HOLISTIC ROAD TO GREATNESS Cory Papineau has worked his way up the ladder to become one of Winnipeg’s top financial advisors 2014

BEGINS STUDYING FOR INTERNATIONAL WEALTH MANAGEMENT COURSE

2011

GOES TO ASSINIBOINE CREDIT UNION

“This is all about continuing education for me.

It’s going to help to grow my relationships with a base of higher-net-worth clients, which will serve me well as I move forward”

With his latest move to Assiniboine Credit Union, Papineau had the chance to go back to his social-justice roots “This is the first place where I’ve worked that was in line with my personal beliefs; it reminded me of my union days. I consider myself a social liberal, and the ACU puts people before profits.

It’s not all about the bottom line, and I’m rewarded for client retention, which encourages healthy relationships”

2007

EARNS CFP Papineau calls earning his CFP designation “an important step in my career” “I wanted to be involved on the ground floor and help families plan for the future.

The most rewarding thing is to get referrals to another family member you’ve worked with”

1998

ENTERS FINANCIAL INDUSTRY Starting at the bottom of the ladder at RBC, Papineau got a crash course in the competitive nature of the industry “There was so much competition to move up, so you really had to prove yourself.

I started in customer service, then moved to credit and later did investments”

At university, Papineau studied labour issues, economics and history – and got some on-the-ground experience “I’ve always been interested in labour studies because my dad was VP of a union. I worked at a paper mill during school as well, so I got to see how people were treated firsthand. Those experiences really shaped my approach to my career”

2005

MOVES TO SCOTIABANK At Scotiabank, Papineau had the opportunity to help move the bank in a new direction “The bank was in a really tough position. It was known more as a credit bank, and we were trying to go more into investment circles. The portfolios were weak at the time, so I had a chance to really turn things around and work with some of the top portfolio managers in the country”

1994 WORKS IN RETAIL

1989 STARTS AT UNIVERSITY OF MANITOBA

Before joining the financial industry, Papineau worked retail jobs for four years, during which he learned valuable lessons about customer service “It assisted in my development because I was good at it and was able to get a lot of referrals based on the way I treated people.

It’s a lesson that served me well for my career. It’s all about the customers and how you treat them that dictates your success”

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5/06/2015 10:19:03 AM

PEOPLE

OTHER LIFE

A NEW PICTURE

Before Shawn Rutledge became one of PI Financial’s brightest investment advisors, he had ambitions to be a world-renowned artist

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

FOR SHAWN RUTLEDGE, the goal is simple – clients come first. It’s a mantra held in high regard by most financial advisors, who serve their clients’ interests ahead of their own.

But when it’s time to focus on himself, Rutledge turns to his paintbrush for inspiration.

Whether it’s acrylic, watercolour or sketches, Rutledge has been working

20

Years spent painting after forming an interest as a child

56

on a series of landscapes and still-life pieces he hopes to show in the future.

“At one point, I almost joined the animation program at Sheridan College, but my uncle was an accountant, so I got into business instead,” he says.

“It’s been a love of mine since I was a kid, and I’m still working on building a portfolio so I can do showings down the line.”

10

Years working for big banks

$500

Highest price he’s received for one of his paintings

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Change the Conversation.

Every day, financial advisors hear from jittery clients about how all the noise in the marketplace will affect their investments.

We’re here to change that conversation.

At Sentry Investments, our goal is simple: upside participation, downside protection and cash flow along the way. It’s why more and

more advisors are turning to Sentry. It’s also what our Personal Pension Portfolios aim to deliver. The four Portfolios offer access to nine traditional and alternative asset classes favoured by pension managers. Each asset class is represented by a concentrated group of holdings; this is not a fund of funds. introducing sentry Personal Pension Portfolios.

Think long term. Think Sentry. sentry.ca/portfolios

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

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FEBRUARY 2015 Assets growing nicely since I moved.

Firm values more than my book.

I’m respected.

OCTOBER 2014 Started advisor group to support our corporate goals to recruit more female advisors. Like that.

JULY 2014 Helped client through job loss.

Put her in touch with a career coach I know. My value is more than just the money part. Feels good.

MAY 2014 Connect often with advisors in my office. We supported each other when we got licensed as Portfolio Managers. Nice.

SEPTEMBER 2013 Made the move to Dundee Goodman.

Good people in my life.

FEBRUARY 2013 When I started, no one believed I could do this job. Now Dundee Goodman wants to hire me.

Gratifying.

WE FOSTER GROWTH. PORTFOLIOS AND OTHERWISE. When people are given the freedom to act, they grow. When people are trusted and supported, they flourish. When people feel deeply responsible and charged with doing the right thing – you got it – they’re happy. And when they’re happy, their clients tend to be too. If a place that embraces the possible and encourages portfolios to grow by encouraging people to grow first sounds interesting, call John Cucchiella in strictest confidence at 647 428 8225.

Dundee Goodman Private Wealth is a division of Dundee Securities Ltd. Member CIPF. Dundee Goodman Private Wealth is a trademark of Dundee Corporation, used under license.

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