Wealth Professional 3.03

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APRIL 2015

CONNECT WITH US

CONTENTS CRM2

Everything advisors need to know to arm themselves for the arrival of the new transparency regulations

22

40

FEATURES

The art of negotiation isn’t about getting your way at any cost

42 Harley Lockhart of Advocis defends the choice of embedded compensation

PEOPLE

INDUSTRY ICON

Mawer Investment Management’s approach might be sedate – but it’s working. Company president Michael Mezei explains why

18

plus.google.com/+WealthprofessionalCa

04 Editorial

NEGOTIATE BETTER

GUEST COLUMN

twitter.com/wealth_proca

UPFRONT

COVER STORY

FEATURES

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

38

Life in the post-CRM2 world

06 Statistics Are constantly decreasing interest rates causing a currency war?

08 Head to head Advisors weigh in on the necessity of CRM2

10 News analysis Why advisors are speaking out against the Ontario Retirement Pension Plan

12 Intelligence This month’s key corporate moves and new products

14 Fund update FEATURES

CHANGE OR DIE

To stay relevant in today’s economy, businesses must constantly evolve.

Here’s how to manage the process

44

The methodology behind a new global strategic yield fund

16 Alternative market update One firm’s strategy for tapping into private equity

PEOPLE 34 Advisor profile

How Dean Colling found success as a discretionary advisor

47 Career path FEATURES

LESSONS FROM A SMALL BUSINESS OWNER

From finding a niche to effective marketing, these are 10 rules you can’t afford to ignore

When she couldn’t find the job she wanted, Rona Birenbaum created it

48 Favourite things

Shafik Hirani, a Calgary-based advisor with Investors Group

WEALTHPROFESSIONAL.CA CHECK IT OUT ONLINE

2 www.wealthprofessional.ca

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2015-03-12 11:49:45 AM

UPFRONT

EDITORIAL wealthprofessional.ca

CRM2 is here.

Can advisors finally get back to work?

M

ore than a decade after regulators began talking about them, the long-awaited fee-transparency regulations known as CRM2 are finally being implemented. Come 2016, when the final phase is ushered in, Canada’s financial advisory industry will be a new and more transparent industry. This will help boost the image of the industry in the eyes of the public. This is a good thing.

But the journey to compliance has been long. The effort and resources devoted to implementation have been serious. Average advisors have taken time from their real work, which is to provide investment advice and services to the public. Now that the implementation is going ahead, perhaps it’s time to let the industry take a breather from major regulatory reforms.

This was a point made at the recent annual IIAC 2015 Outlook Lunch. The irrepressible, always entertaining, but insightful CEO of

According to 87% of Canadian investment dealer CEOs ... “the status quo or improved conditions” are likely for global markets in the year ahead Caldwell Investment Partners, Thomas Caldwell, made the point that the industry is suffering from “regulatory strangulation.” He worries clients are going to suffer “massive information overload” as they receive vast new reams of paper. “How many are going to read all this stuff?” he wonders. Very few would be a good bet.

That said, not all is doom and gloom. Following Caldwell to the mic was the head of the Investment Industry Association of Canada, Ian Russell. He had some good news for wealth managers: According to 87% of Canadian investment dealer CEOs who responded to a recent survey, “the status quo or improved conditions” are likely for global markets in the year ahead. Even better, 81% share this outlook for Canadian markets. A majority also are planning to hire new wealth managers.

CRM2, take that.

The WP team

APRIL 2015 EDITORIAL Editorial Director Vernon Clement Jones

SALES & MARKETING National Accounts Manager Dane Taylor

Senior Writer Jeff Sanford

Associate Publisher Trevor Biggs

Writers Samo Ayoub Will Ashworth

General Manager, Sales John Mackenzie

Research Editor Ryan Smith

Marketing and Communications Claudine Ting

Copy Editor Clare Alexander

Project Coordinator Jessica Duce

CONTRIBUTORS Harley Lockhart Josh Masters Michael McQueen Blaise van Hecke

ART & PRODUCTION Design Manager Daniel Williams Designers Loiza Caguiat, Kat Vargas Production Manager Alicia Salvati Traffic Manager Kay Valdez

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

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Wealth Professional is part of a international family of B2B publications and websites for the finance industry 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

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12/03/2015 11:51:34 AM

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12/03/2015 11:51:40 AM

UPFRONT

STATISTICS

Currency war Central banks have been busy outdoing each other to decrease rates and keep currencies from rising.

The phrase ‘currency war’ is suddenly trendy

STOOP TO CONQUER?

Canada

Overnight rate: 0.75% Recent cut: 25 bps

Central banks around the world have moved to cut their key benchmark rates to boost exports and their economies. That kind of currency manipulation is more and more common and is tantamount to a declaration of war at a time when a nation’s exports are increasingly dependent on a rock-bottom currency.

US

Overnight rate: 0.25% Recent cut: 75 bps

THE TIMELINE Bank of Nova Scotia’s chief currency strategist suggested the new volatility in currencies is “flirting with levels typically reserved for crisis.”

Case in point: for one recent day’s trading the Canadian loonie touched a low of 79.46¢ US and a high of 80.57¢. Another example: The euro achieved a 98 bps spread.

Jan. 15 - Switzerland effectively untethers its franc from the euro by removing its cap. The move ‘shorts’ the euro. As Raymond James analyst Chris Raper puts it, the Swiss “have a reputation as being the smartest central bankers on earth. …This is a big ‘no-confidence’ vote in the euro.”

Feb. 1-28 - Intraday spread in the loonie surges to $0.035, a near record high and a reflection of the BoC’s hands-off approach in the wake of falling oil prices.

Feb. 3 - Australia surprises markets with a 25 basis-point rate cut, a step that Christy Tan at National Australia Bank says “stoked speculation of a currency war.”

Feb. 12 - The Swedish central bank becomes the second country in the modern era to take its interest rate negative: -0.1%. Swedes are now paying the bank to hold their money March 1 - China’s central bank cuts key rate by another quarter point to 5.35 per cent, the lowest in more than five years. Moves sends yuan to lowest level since 2012

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UPSIDE TO LOONIE’S DOWNSIDE

1.7

5.2

The climb in manufacturing sales (December 2014)

The increase in machinery exports since November 2011

per cent

per cent

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Sweden

Russia

Overnight rate: 0.10 % Recent cut:10 bps

Overnight rate: 15% Recent cut: 200 bps

UK

Overnight rate: 0.50% Recent cut: 50 bps

Finland

Overnight rate: 0.05% Recent cut: 10 bps

Germany

Overnight rate: 0.05% Recent cut: 10 bps

Switzerland

China

Overnight rate: -1.25% Recent cut: 25 bps

Overnight rate: 5.35% Recent cut: 25 bps

Japan

Overnight rate: 0.10% Recent cut: 10 bps

Australia

Overnight rate: 2.25% Recent cut: 25 bps

THE LOONIE’S UPS AND DOWNS

US dollar

The loonie mostly moves in opposite directions to Europe’s major currencies – the euro and the pound. Its ebbs and flows are trending down after hitting highs of $1.05 in 2011. Still, analysts expect it will stabilize at 80¢ for the rest of 2015.

Loonie Euro British pound

$1.2 $1.0 $0.8 $0.6 $0.4

2005

2006 2007

2008 2009 2010

2011

2012

2013

2014

2015

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12/03/2015 11:52:44 AM

UPFRONT

HEAD TO HEAD

GOT AN OPINION THAT COUNTS? Email wealthprofessional@kmimedia.ca, or join the discussion at www.wealthprofessional.ca/forum

Q: Is CRM2 really necessary?

While advisors will go head to head in debating the coming effects of the new transparency regulations, they’re just as divided on the question of whether or not those changes are really needed

Laura Thompson

Malcolm Fletcher Financial planner ROCHEBANYAN

Certified financial planner DEGRAAF FINANCIAL STRATEGIES

Yes and no. Change is needed, but change that eliminates choice by consumers and reporting that only shows partial disclosure is not. When clients don’t know what commission their advisor makes and learn about it secondhand, this lowers the standard of ethics this profession should exude. When commissions like Deferred Sales Charges [DSC] are used, hopefully the CRM2 reporting will show the redemption costs a client will incur. I’ve heard of firms encouraging their advisors to use DSC-loaded investments prior to CRM2. The rationale is the ...

5% commission won’t yet show up on a client’s statement, yet once CRM2 takes full effect, it will appear that the client is paying half as much [as] a client who was invested on a front-end commission of 0%. Other advisors moving to sell GICs and insurancewrapped mutual funds called ‘segregated funds’ and don’t have the disclosure requirements under CRM. This only creates an unlevel playing field.

I believe that the CRM2 amendments ... may be well-intentioned, but miss the boat and could soon lead to unintended consequences. Protecting Canadian consumers is a laudable objective, and the federal Comp­ etition Bureau intervenes where appropriate.

Why the CSA seemingly believes that investors need more protection ... is unclear to me.

The CSA seems to insinuate that dealer comp is shameful, while they show a reckless disregard for the client’s total investment costs. Embedded service fees that my employer earns on GICs are 20 bps; bond funds, 50 bps; dividend funds, 50, 60, 75 or 100 bps; and 100 bps on most other equity funds. A portfolio with 20% GIC, 20% bonds, 20% dividends and 40% growth typically generates an average 66 bps service fee, well below the 100 to 125 bps levied by others who fee the entire account equally. And my clients’ all-in MER, including HST, is 1.52%. But the CSA wants to ban embedded fees next.

Advice to the CSA: Look before you leap!

I don’t believe that disclosing commissions is going to benefit the majority of Canadian financial consumers, but rather confuse them – yet another line on their financial statement to decipher what they have always been paying for, either in an MER or the pure cost of insurance. As an independent advisor, I have the choice to compare all products I am licensed to sell, across all companies in Canada, and offer recommendations that I believe suit the client’s needs the best. The companies I work with all pay the same commission rates for the same products, so there is no financial motivation to recommend one investment or insurance policy over another. Of course we get paid for what we do – which can be countless hours when preparing a financial plan – but how is it in the client’s interest to show that on every statement? When you buy something at the store, does every receipt show the cost Walmart paid for the item vs the retail price they sold it to you for?

Financial advisor INVESTIA FINANCIAL SERVICES

8

Léony deGraaf Hastings

www.wealthprofessional.ca

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12/03/2015 11:58:03 AM

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12/03/2015 11:58:07 AM

UPFRONT

NEWS ANALYSIS

The best laid plans …

It’s a game-changer – Premier Kathleen Wynne has announced she’ll go ahead with the Ontario Retirement Pension Plan. But advisors are already asking questions and organizing resistance

THE NEW Ontario Liberal government surprised many when it announced in its latest budget that it would create the ORPP, a new mandatory pension plan for Ontario residents.

Rookie minister Mitzie Hunter was handed the task of shepherding the legislation, but she is not going to have an easy time.

The idea of a new pension plan is, on the surface, a no-brainer. Who isn’t in favour of securing the retirement of aging citizens?

“We know people are not saving enough for retirement, and we know that two-thirds don’t have a workplace pension,” Hunter recently told the Toronto Star. “We don’t want a generation of Ontarians to retire and not have enough to sustain themselves.”

But the deeper story is a little more complex; advisors point to the plan’s knock-on effect on their practice and clients’ financial health. The new government-controlled plan would be mandatory for many workers. Contributions would come directly off paycheques. For many advisors, this will mean less money for clients to invest through private channels.

When the plan was first announced this past spring, advisors quickly spoke up. “In the past 40 years I have saved in my RRSP, and during that time had to go without things and a lower lifestyle,” said one irate advisor. “I am pleased to say today that I have sufficient funds in my RRSP to produce a monthly income in excess of $6,000. Honestly, I do feel sorry for those who were not prepared to sacrifice a bit today to

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have a great tomorrow, [but] my vote will go to a different party.”

A couple of months on, the annoyance among advisors is still palpable. “This will significantly affect the financial industry by reducing people’s ability to save and creating the perception that government will look after you, and that you don’t have to be financially responsible,” says Mark Matsumoto, a Whitby, Ont.-based advisor with Investia Financial Services. “I think it’s wrong, and I am against it.”

The organization released a report suggesting that the plan would likely see employers reduce contributions to their existing workplace pension plans. According to the CLHIA, up to twothirds of companies would consider eliminating their plans if the ORPP becomes reality.

Next up was the Investment Industry Association of Canada [IIAC], which just released a paper that enumerates a number of issues. IIAC is concerned the plan has been launched haphazardly, quickly and without consultation or real research. The organization

“This will significantly affect the financial industry by ... creating the perception that government will look after you, and that you don’t have to be financially responsible” Mark Matsumoto, Investia Financial Services The dismay is shared broadly among those on the right of the political spectrum. Prime Minister Stephen Harper famously smirked when Ontario Premier Wynne brought up the idea in a meeting between them. Now, a few months after the announcement of the plan, a flurry of reports has arrived criticizing it.

First out of the gate was the Canadian Life and Health Insurance Association (CLHIA).

is also concerned that the substantial start-up and administrative costs would have serious unintended consequences on Ontario businesses and investment in the province.

IIAC also questions whether the assumptions used to justify the plan – a ‘gap’ in retirement savings—are really what the government suggests. “The Ontario government should conduct a thorough analysis into the extent the

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2015-03-12 9:55:50 AM

PUBLIC SECTOR PAYDAY

“We know people are not saving enough for retirement ... We don’t want a generation of Ontarians to retire and not have enough to sustain themselves” Mitzie Hunter, Associate Minister of Finance ORPP will reduce the real retirement savings gap,” the report says. “Numerous studies indicate that retirement savings shortfalls are not uniform across all income classes, making a ‘broad-brush’ policy approach inappropriate.”

According to IIAC, lower-income earners have almost full-income replacement under the existing system, given access to Old Age Security [OAS] and the Guaranteed Income Supplement [GIS]. Higher-income individuals also will likely have adequate income replacement in retirement. The retirement savings shortfall will likely only affect middle-income individuals without a workplace pension plan and those who have not accumulated savings in a tax-PAGE 2 assisted plan, such as an RRSP. In addition, the report points out, “the effects of recent changes in federal retirement savings policies and plans on the behaviour of Canadians will impact the savings shortfall, including the introduction of PRPPs, and possible future increases in TFSA limits.” That is, the so-called savings gap is already being

addressed through other means. “Effectively, if the ORPP is implemented as proposed, Ontario will be creating a retirement savings program monopoly favouring one savings option over group and individual RRSPs,” the report says.

“We believe the Ontario government should undertake the required analysis as described ... before implementing the ORPP.” The Investment Funds Industry of Canada [IFIC], the trade group representing mutual fund companies, has also weighed in. IFIC just released its own report, suggesting the plan be scrapped altogether. IFIC argues that a Pooled Registered Pension Plan (PRPP) is better equipped to address the gaps in Ontario’s retirement savings framework and said the proposed plan could avoid negative consequences that are inevitable to several industries (small to medium-sized business in particular).

“Ontario’s proposed PRPP framework follows the federal voluntary model; however, as other provinces have demonstrated, PRPPs easily can be easily adapted to achieve provincial

At the same time the debate over the ORPP is picking up, Canadian public sector pension plans have been picking up a reputation as the global leaders in over-compensated public sector pension plan executives.

According to a report from the Financial Times, the compensation of executives at Canadian public sector pension plans represents a global “outlier” – and not in a good way. The Canadian public sector plans are way out in front in terms of over-compensation.

The FT report received barely any attention in Canada. But global readers of the paper learned that the three biggest Canadian public sector pension funds, the Canadian Pension Plan Investment Board [CPPIB], the Ontario Teachers’ Pension Plan [OTPP] and the Ontario Municipal Employees Retirement System [OMERS] were all at the very top of the list in terms of well-compensated executives.

The article cited the example of Jim Leech, who took home $7.4 million before retiring from the OTPP in 2013. All of the Canadian executives cited made well over a $1 million. By contrast, Anne Stausboll, manager of the massive Calfifornia public sector pension fund, Calpers, was paid just over $400,000. The article also went on to noted that Canadian public sector fund salaries outstrip the total earnings of many chief executives in the private fund sector. public policy goals,” says IFIC CEO and president Joanne De Laurentiis. “A well-constructed PRPP framework could directly address real gaps in retirement savings options currently available to employers and employees while avoiding the potential negative consequences posed by the ORPP.” If this pension plan comes to be, advisors will have to work it into financial plans. “This is going to be another element advisors need to educate clients about. This is about preparing them for the inevitable hit it will put on their cash flow.

This is going to reduce your capacity to save outside of these plans, and that’s why advisors need to be aware of the fact that their clients are going to see less money on their regular pay. It could impact the plans they’ve set up.”

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12/03/2015 12:12:30 PM

UPFRONT

INTELLIGENCE Wealth Professional ’s regular look at what’s happening in the industry

PEOPLE

CORPORATE MOV ES >> Laurentian Bank has made way for change by appointing François Desjardins as chief operating officer. In addition, Desjardins will succeed Réjean Robitaille as CEO (see below) when the executive steps down from the top job later this year. Desjardins continues in his other roles as president of B2B Bank and Laurentian’s retail services.

>> Manulife has appointed OpenText Chairman Tom Jenkins to its board of directors. Jenkins already serves on the boards of both Thomson Reuters and TransAlta Corporation. The OpenText chair was appointed an Officer of the Order of Canada in 2011 for his contribution to education and innovation in Canada.

AVISON YOUNG EXPANDS PROPERTY PORTFOLIO

Avision Young has has acquired Calgary-based real estate management company Peregrin Inc. The latter’s services include property management, asset management and project management for high-net-worth individuals and institutional money in western Canada. The deal adds approximately 1 million square feet of property under management to Avison Young’s global portfolio.

FIERA CAPITAL ADDS NY FIRM

>> Solium Capital has appointed Marcos Lopez as its CEO. The TSX-listed, Calgary-based company provides cloud-enabled services for share plan administration and equity transactions for more than 3,000 companies in the US, Canada, UK, Spain, France and Australia. Lopez doesn’t take over officially until the end of May.

>> Axia NetMedia Corporation has appointed Fred DiSanto, CEO of Cleveland-based investment advisor The Ancora Group, to its board of directors. DiSanto has a long history in the financial services industry and will be a welcome addition to the TSX-listed, Calgary-based fibre optic communications infrastructure company.

Fiera Capital has announced that it’s acquiring New York-based Sampson Capital Advisors LLC for US$33.5 million.

Sampson specializes in fixed-income investment management, handling US$7.6 billion in assets under management. The acquisition bolsters Fiera Capital’s US asset management business. With this deal, Fiera now manages more than $96 billion in global assets.

“With this acquisition, we are creating a full-fledged global asset manager in the US, adding strong leadership and investment talent in order to further expand our presence in this dynamic and sophisticated market,” CEO Jean-Guy Desjardins said about the deal.

INTACT FINANCIAL ACQUIRES INSURANCE ARM

>> Laurentian Bank CEO Réjean Robitaille is stepping down from the top job, effective November 1, 2015. Robitaille has been at the helm of Laurentian Bank since December 2006. In that time, the bank has doubled in size, has had eight consecutive years of record profitability and has increased its dividend by 86%. Robitaille leaves the bank far stronger than when he was first appointed as CEO.

>> Economical Insurance has announced the retirement of longtime director Charles M.W. Ormston after 20 years of service to its board. Ormston joined the Economical board in 1995 and for the last 10 years has been chair of its human resources and compensation committee. Prior to forming his own asset management company, Ormston spent 20 years in the distribution of industrial gases and welding supplies.

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Intact Financial has announced plans to buy the direct-to-consumer insurance operations of Canadian Western Bank.

The acquisition provides Intact with direct-to-consumer insurance from coast to coast. The deal will be internally financed by Intact and immediately accretive. In 2014, Canadian Direct Insurance Inc. wrote $140 million in home and auto premiums. Annual synergies from the deal are about $10 million after taxes.

CANADA LIFE MAKES MOVE INTO UK AND IRELAND

Great West Lifeco’s Canada Life subsidiary has taken a big step across the pond with the acquisition of Legal &

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OV ES

PRODUCT NEWS >> TD BANK has announced that it’s introducing SMS customer service to its clients, the first major Canadian bank to do so. Texting allows clients to quickly obtain answers from live TD agents regarding questions they have about TD products and services. Although this service is new, the prospect for future growth is significant, given the increased usage of texting by most Canadians.

General International (Ireland) Limited (LGII). LGII provides investment and tax-planning solutions to the UK high-net-worth market. With almost $5 billion in assets under administration, the deal gives Canada Life a big leg up in the competitive Ireland and UK markets.

“The proposed transaction will enhance the position of Canada Life in the UK, and give clients and professional advisors further confidence in our UK offshore business,” Great West Lifeco CEO Paul Mahon said of the deal.

THREE TORONTO ACCOUNTING FIRMS MERGE

Houghton Valvano Grover Phillipp LLP has been created through the merger of three suburban Toronto accounting firms: Lemoine Hyland LLP, The Giannandrea Partnership LLP and James F. Hyland Professional Corporation. The consolidation allows all three firms to continue providing clients top-notch client services. “Each firm has a successful track record of expanding through client and professional network referrals while growing their practices internally as their clients’ businesses grew,” said John Valvano, one of the partners in the merger.

QUEBEC INVESTOR SUPPORTS SMALL BUSINESS

Fonds de Solidarité FTQ has committed $10 million to the Quebec government’s PerforME program, which supports high growth small- and medium-sized enterprises in the province of Quebec.

The largest capital development network

in the province, the Fonds is a socially responsible investor that is planning to invest $1.6 billion in Quebec businesses over the next three years.

ESURANCE NOW IN ALBERTA

The online insurance company owned by Allstate has moved into Canada for the first time. Self-directed insurance is the wave of the future when it comes to insurance in the Canadian market. As Esurance CEO Gary Tolman said at the announcement, “Canadians use the Internet at a higher rate than any other country, yet quoting and buying insurance online is still in its infancy. We think there is a tremendous opportunity to introduce Canadian consumers to insurance for the modern world.”

NEW M&A PRACTICE AT WELCH

Welch LLP and WelchGroup Consulting have announced the creation of a new Mergers & Acquisition (M&A) practice under the guidance of veteran M&A expert Stephan May. The addition of Ottawa-based May allows WelchGroup Consulting to broaden the advisory services it already offers to clients.

CIBC WINS HONOURS

CIBC has been named Best Treasury and Cash Management Bank in Canada by Global Finance magazine. Phil Griffiths, CIBC’s senior vice president for global transaction banking, said of the award, “We believe this recognition from Global Finance speaks to our client focus and the value our clients see in having their business banking relationship with CIBC.”

>> SSQ FINANCIAL GROUP is set to deliver Canada’s most comprehensive critical illness coverage starting in March. SSQ’s new product will cover auto-immune diseases (becoming the only Canadian insurer to do so), as well as 40 other illnesses. The product is ivided into three separate group coverages: Basic covers up to six illnesses, Complete covers 24, and Total covers 40 illnesses. No word yet about cost. >> HOME TRUST has established an issuing relationship with Wave Crest Group Limited, a multi-currency digital payment provider for businesses and governments. Home Trust, a wholly owned subsidiary of Home Capital Group, will become the official issuer of Wave Crest’s MyChoice and MyFare prepaid programs in Canada, which provide more secure and efficient payment solutions for Canadian businesses. >> THE INDUSTRIAL AND

COMMERCIAL BANK OF CHINA has announced

that Canada’s Chinese currency trading hub is scheduled to launch in March. William Zhu, president of the Industrial and Commercial Bank of China, told the House of Commons finance committee that the country is speeding up the process of liberalizing its financial system – which means Canadians may only have three or four years to fully benefit from the competitive edge the hub will provide. The yuan had the fourth-largest share of global trade finance in January 2012 – 1.89% of letters of credit and collections.

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UPFRONT

FUND UPDATE

Survival in the CRM2 world plagued the firm. “Where they went wrong was with attrition and ability to retain managers,” Chan says. “You don’t want the good ones leaving. Advisors do not like having to explain to the client they have to leave the fund because a manager left. That’s very uncomfortable, and [they] lost some brand equity there.”

Gaining access to distribution would be another intelligent starter. Having a network of advisors to distribute its product would be

CAN THE one-time market darling AGF survive in the new CRM2 world?

Way back in the golden days of the late 1990s, AGF was one of the biggest independent mutual fund players on the street. Beloved by advisors, it garnered huge market share and grew by leaps and bounds as markets returned upwards of 20% a year and Canadians shifted money from GICs to mutual funds.

Since then, times have become a little tougher. Canada’s Big Five banks realized they missed the boat and scrambled to set up huge mutual fund companies. Market returns have not been as easy. Some high-profile managers left. Product performance lagged. And now the CRM2 world approaches. New transparency regulations coming into existence will put serious downward pressure on fees – companies across the sector have been slashing the

NEWS BRIEFS

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amount they charge clients, and that’s hurting profitability.

In response, AGF has been busy getting itself into shape, tightening ship, battening down the hatches. Most dramatically, the company recently announced it would slash its hefty dividend by a whopping 70%. As a result, stock is down 40% on the year. Can AGF hang on? Don’t count them out yet.

“I get the question all the time: ‘What would I do if I was at AGF?’ There is no easy answer,” says Scott Chan, an analyst at Canaccord Genuity Corp. “They don’t have scale. They don’t have distribution. What do you do?”

He points out that the company has changed its compensation model for portfolio managers to provide stronger incentives to stay with the firm. Hopefully this will help stem some of the recent high-profile manger defections that have

BlackRock launches new funds BlackRock, the world’s largest fund manager, has announced the launch of a new low-cost US Total Stock Market and currencyhedged fund for developed markets. The company is also launching a fund that provides unhedged exposure to dividend-paying US companies. The funds are part of a trend toward offering investors a way to achieve income in a radically low-yield environment.

BlackRock also recently announced the launch of a new unit that’s focused on social impact investing.

“Advisors do not like having to explain to the client they have to leave the fund ...” smart. Chan suggests following the example of CI, which recognized early on that distribution was going to be critical. “They formed Assante.

They struck a deal with Sun Life that gave them access to those agents. That was a gamechanging deal that people don’t think about. CI was also a little more aggressive on price. Maybe not as aggressive as the banks, but they recognized the importance of scale, lower MERs, new products and discounts for HNWs.” Chan says the dividend cut will help AGF. “It’s prudent to preserve capital to help the business,” he says. “There’s always hope. They do have excess cash on [their] balance sheet.

It’s not too late.”

CSA warns about medical marijuana stocks Investors should proceed with caution when putting money into the nascent Canadian medical marijuana business, according to a staff review of issuers released by the Canadian Securities Administrators. The CSA’s review found companies in this sector offered “unbalanced and promotional disclosure that often promoted the benefits, but failed to outline the risks involved. …

The level of deficiency in issuers’ disclosure is unacceptable, as investors need comprehensive, balanced information to understand the business changes being proposed by these issuers.”

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Q&A: Going global for strategic yields DANIEL SOLOMON CIO and lead portfolio manager NEI

Rates on government bonds have gone negative in Switzerland, Germany, Denmark, Finland and Sweden. Can investors still generate cash from fixed-income? NEI portfolio manager Daniel Solomon says yes WP: These negative rates are odd, aren’t they?

WP: Explain those covered calls.

Daniel Solomon: I think that’s what everyone in the investing world is thinking. Yields are lower than in the midst of financial crisis. Then, everyone thought the system was going to collapse. But yields are even lower now, at a time we’re hitting alltime highs on the S&P 500. There is a disconnect somewhere.

People are asking, ‘How do I get the yield I need?’ The government of Canada bond the yield is 1.37%. With inflation at 1.5%, you have to be willing to lose money if you want that asset class.

What we wanted to do is engineer a fund that generates more dividend per year.

DS: Where we see a low upside over the short-term on a stock we own, we sell a call on that stock. [We] sell the right to own that stock in the future … there is a premium for that today.

Potentially, you’re going to lose upside if that stock goes up a lot. But we’re not after capital gains. We’re after yield today.

We’re exchanging potential upside for income today. We are transferring some of the upside into income now. For us, in terms of a yield portfolio, it makes sense.

We have the vision ... if we see a pothole on the road ahead, we can shift the balance from, say, Canadians bonds to US bonds. We allocate to the different sector. But it’s time for us to be more involved. Clients want us to be even more active. I can pretty safely tell you the return on Canadian bonds over next 10 years is not going to be exciting. You have to see the big picture.

WP: Tell us about the fund.

DS: The eight different sleeves in this fund tap different areas that generate yield. You can get up to 8% covered calls. You can find government bonds, particularly outside of Canada, that pay much higher. There are some pockets that have great profiles.

The Mexican two-year is yielding 4%. What we decided to do was to allocate to these different sectors. The S&P 500 has a dividend yield of 1.94%. That’s still better than Canadian bonds. But we get a US dividend yield of 3.22% by sticking to utilities and telecoms. By doing this in each sleeve, we can generate much higher total yield, 4.33% – that’s higher than anything you can put together. You need to get yield from everywhere.

MFDA develops proficiency standards for ETFs The Mutual Fund Dealers Association is developing a set of standards to allow advisors licensed to sell mutual funds to trade exchange-traded funds. Currently, these representatives can trade exchange-traded funds that meet the definition of a mutual fund – the majority of ETFs. But there is a challenge for mutual fund dealers who do not have access to an exchange in order to settle the trade. The Canadian ETF Association is working on a similar initiative that it would allow mutual fund advisers to sell the majority of ETFs directly to clients.

WP: This goes against the trend of indexing.

DS: Absolutely! We are not fans of indexing. We are big fans of active management. Some indexes are inflated for reasons not related to stock price. We think there are better opportunities for active management now than ever. You don’t want to get rolled over by events. Let’s move to where these events create value. The value pocket moves over time.

Canadian mutual funds on 15-year winning streak A survey conducted by the Financial Post found that Canadian mutual funds have done well over the last 15 years. According to the newspaper’s data for the 15-year period that ended Dec. 31, 2014, funds from Canada beat out those from the rest of the world.

Canadian equity funds averaged returns of 6.2%, while US equities overall averaged 1.3%, and foreign equities averaged just 0.7%.

Canadian fixed-income funds yielded an average return of 4.3%, while global fixedincome funds averaged just 2.6%.

New virtual broker receives trading The Board of Directors of Canadian Derivatives Clearing Corporation has approved the membership application of BBS Securities, whose Virtual Brokers service offers retail trading stocks for as low as $0.01 per trade. In addition, the company will allow investors to invest in and trade ETFs for free, as well as free RESP investing for students. “This will open new business opportunities by allowing us to improve and expand our full-range brokerage services in the Canadian market,” said Kambiz Vatan-Abadi, COO of BBS Securities.

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2015-03-12 9:56:25 AM

UPFRONT

ALTERNATIVE MARKET UPDATE NEWS BRIEFS

OSC publishes new exemption The Ontario Securities Commission is allowing a new exemption that will allow issuers to offer a security without a normal prospectus to investors who have a sufficiently close relationship. Issuers must be able to assess the capabilities and trustworthiness of the investors, and a signed risk acknowledgement form must be obtained from the investors. The move is designed to facilitate capital-raising for start-ups and small to medium-sized businesses.

Global affairs spur alternative thinking A new BlackRock study suggests recent world events could encourage institutional investors to make significant shifts toward alternative investments. A poll of 169 of BlackRock’s largest institutional clients found these investors focused on growth rates in developed economies, divergent monetary policies and deflation. As a result, respondents predicted significant moves in their portfolios toward alternative investments.

Activist hedge funds driving improvements Activist hedge funds are driving improvements in share price, operating performance and

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governance at the companies in which they invest. According to a new paper by AIMA, that kind of “activist engagement is positively correlated to improvements in the share price and operating performance of targeted companies.” The data suggests activist hedge funds have a 25% improvement on average in the share price of targeted companies two years after an exit.

TriWest: Cracking the code

Sprott announces limited partnership Toronto-based Sprott Asset Management has completed the first closing of its initial public offering of a new limited partnership. The partnership’s investment objective is to achieve capital appreciation and tax benefits by investing in a diversified portfolio of flow-through shares and other securities of resource issuers. Sprott anticipates investors will be eligible for a 100% tax deduction of the amount invested in the partnership.

CSA updates on alt market reforms The Canadian Securities Administrators published an update on a proposal for a new regulatory framework for alternative investment funds. The Alternative Funds Proposal is the final phase of the CSA’s ongoing effort to modernize regulation of investment fund products. Phase one, now complete, focused on mutual fund regulation; phase two deals with non-redeemable investment funds (private equity funds). The CSA is reviewing the Alternative Funds Proposal, as well as certain restrictions on physical commodities, short-selling, the use of derivatives and borrowing cash.

ALBERTA-BASED private equity fund TriWest Capital Partners has just closed its fifth private equity fund, and it’s a record. The firm has gathered commitments for $500 million.

The firm’s roots are in a 110-year-old food processing company, Burns Foods Inc. Burns executive Rob Jackson met a New York-based private equity player, Cody Church, at an Alberta wedding. The pair got together with one-time Bennett Jones lawyer Lorne Jackson, and TriWest was born. “We had the operations guy, the legal guy and the finance guy,” Church says.

The first fund launched in early 1999. It raised just one tenth of what the latest fund has, but it was a victory at the time. The company went on to reinvent dozens of mid-sized firms in western Canada. As per the mandate of private equity, TriWest, acquires companies through management buyouts, growth financings and corporate divestitures. The fund provides management and consulting advice, and improves operations. Five years or so later, the companies are sold for a profit. The firm also helps founders and operators cash out at retirement.

“These are people who are at a point in their career when they want to take some money off the table,” Church says. “Selling us a piece of their business is a great way to take some of that risk off the table.” However, the founders do not disappear. “We like to keep them around as a board member or consultant.

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That’s our view.”

Today, TriWest has refurbished some 32 companies, including Swiss Water, the company that decaffeinates coffee for Tim Horton’s. “We’re the only guys in Alberta and Saskatchewan doing exactly this,” Church says.

So far, the company has raised more than $1.25 billion in committed capital. The investment strategy for Fund 5 is like that of its previous funds – take equity in profitable, mid-sized firms in partnership with existing management, and generate returns through growth and operational excellence. “We have broadbased support. Five institutions in the US signed on. At $500 million we’ll continue to do what we do,” Church says.

But for the first time in Fund 4, says Church, “We had some family offices and their advisors

“Private equity is more mainstream than it has ever been. There is more interest ...” approach us. We had much more family office interest. We had a few track us down. We couldn’t bring them all in. We just didn’t have the room. We were hard-capped on the fund.”

The new interest from advisors is a sign of the evolution and sophistication in the ultrahigh-net worth sector in Alberta. “We’ve seen a much more sophisticated and knowledgeable ultra-high-net worth crowd emerge over the last 10 years,” says Church. “Some family offices now have someone devoted only private equity. You’ve got to be sophisticated and thoughtful in these kinds of investments. ... It is sometimes hard to see where these two camps come together – I’m not sure that code has been cracked yet – but advisors are trying to figure out how to get their clients into private equity.”

But, says Church, “Private equity is more mainstream than it has ever been. There is more interest from family offices. The advisor who doesn’t educate themselves on this runs the risk of missing out. The opportunities are there. You need to find beta … and private equity can offer that.”

Q&A: Private market access DEVON CRANSON CEO Cranson Capital

Devon Cranson, of boutique exempt market dealer Cranson Capital, is rooting for wider investor access to private markets. Here’s why WP: There’s a lot of talk about the exempt market these days.

Where are we at?

DC: The exempt market is now 3% of population. But with an Ontario exemption similar to that in Alberta, we could see 20-30% of population able to access the exempt market. That’s how many new investors we can expect.

That’s a huge boom in our investor base. This would really open up the market. The OSC owes the investing public the opportunity to invest in these kinds of deals.

WP: You do some development deals in the Toronto condo market.

DC: We are helping fund condos. We successfully raised $14.5 million for Plazacorp, for a new condo development in downtown Toronto. This development project gives 100 of our investors the opportunity to participate in a direct equity partnership in a condo deal. For so long, these returns have been available only to the families that have been in the industry for decades.

The condo boom has only been open to wealth property developers or the families that have been running these businesses for years. Everyday investors have never had access to these investments. But we are bringing these opportunities to investors.

WP: Isn’t the condo market overbuilt, if conventional wisdom is to be believed?

DC: If you look at the numbers, there are still 60,000 people coming into the GTA every year. They have not built any apartment buildings in this city for a long time. But at the same time, they put in the Green Belt around the city. There’s no more sprawl happening. It’s all about densifying the downtown and building up. Condo vacancy rates are at a decade low of 1.7%. With the scarcity of land due to the Greenbelt Protection Act, the demand for new housing is rising. This is forcing developers to build upwards. The shortage of single-family homes, the strained affordability for first-time home buyers ... you can actually argue that the housing market is moving toward a supply crunch. The number of condo units in the GTA would have to grow by 230% to meet demand over the next 20 years. Even with all your 10,000 low-rises and 30,000 high-rise units, you still need 40,000 units to avoid a housing shortage in the next few years. I think by 2017-2018, we are going to see a real shortage. If the condo boom slows, we think you are going to see a tight market by 2018.

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PEOPLE

INDUSTRY ICON

BEING BORING Flashy is by no means where it’s at for hotshot Calgary firm Mawer Investment Management. Just ask director and president Michael Mezei THE SCENE: A mid-winter awards show for mutual fund industry executives. The main dining room at the Royal York is packed. The host of the night is the well-known CBC news reader Peter Mansbridge. He appears in Toronto the very night fellow CBCer Jian Ghomeshi shows up at police headquarters to be formally arrested. Mansbridge can’t ignore this, and when he finally takes the mic at the awards show, quips, “It’s a good day to not be at the CBC.” The crowd laughs, heartily. Schadenfreude happens, apparently.

But the name of the radio host is quickly forgotten, however. As the night wears on, the name that is impressed upon the crowd is the oddly titled, relatively small but mighty Alberta-based fund company Mawer Investment Management.

Over the phone a couple weeks after the show, Mawer’s president Michael Mezei sheepishly agrees it was all a bit much. “Yeah, it was a little awkward … to the point where I felt bad for everyone else. Obviously, we’re happy.

We think we’re there on merit. And it’s great that the wins came on our 40th anniversary.

But you wonder … whenever you see someone at the top like that, winning awards, you say, ‘I know where they’re going to be next year.’

These things are often cyclical.”

But Mawer did this last year as well – so it’s not a one-off. For fans of the little-firmthat-does, this is no surprise. Mawer has become a bit of a legend among many in the wealth management industry. Those who pay close to attention to fund manager performance tables know that Mawer has been coming out on top, consistently. Many investment advisors and pension fund types have been singing the praises of the firm’s funds and stock picks, which have been posting impressive gains for years now. Mezei shrugs it off, crediting the company’s rock-steady, consistent approaching to investing. “We are

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extremely consistent in applying our investment plan – and that steadiness has paid off,” he says.

A different approach In an industry often dominated by aggressive Type-A over-performers with over-coiffed hair, the members of the Mawer clan come across as something other. These aren’t smooth-talking Bay Street salesmen. Sure, they might like to be considered boring. But there is something quirky about the firm.

It’s a unique approach in a boastful, ego-driven industry.

Mezei’s foundations Michael Mezei has been president of Mawer since he joined the firm in 2008. He is not a Westerner by birth. He earned a Bachelor of Arts degree from the University of Toronto and an LLB from Osgood Hall Law School, along with various investment industry designations. Mezei practiced corporate law in downtown Toronto from 1987 to 1994. He

“ We have a 99% employee retention rate.

People really care about working here. I think that’s rarer and rarer these days” Michael Mezei Like the too-bright but awkward kid in class, Mawer stands out in a slight nerdy way.

These are the kind of people likely to talk about the role of thermodynamics in investment philosophy in an acceptance speech. (At the awards show, the company’s youngish deputy chief investment officer, Paul Moro, his face hidden behind black-framed ‘hipster’ glasses, managed to work in a bit about how it is the second law of thermodynamics applied to investing. The nod to the deep physics of the universe had to be a first for this awards show.)

Mawer’s considered, non-mainstream approach to investing says something about how it is this Alberta-based firm has managed to sail past the bigger, glossier Bay Street firms.

For Mezei, it’s been about applying the approach that works. It’s about cultivating the right client-focused culture, and then carrying out those basic functions like yard work or brushing your teeth in the morning.

eventually moved on to the investment industry when he became senior vice-president and general counsel for Franklin Templeton Investments. In 2002, Mezei moved to the land of opportunity, Calgary, where he helped

MAWER’S RECENT WINS Best Global Balanced Fund Best Canadian Equity Fund Best Canadian Small/Mid-Cap Equity Fund Best International Equity Fund Best Global Small/Mid-Cap Equity Fund Best Canadian Equity Pooled Fund Best Global Equity Pooled Fund Best Canadian Small/Mid-Cap Equity Pooled Fund Best Global Balanced Pooled Fund Best International Equity Pooled Fund

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“We are extremely consistent in applying our investment plan – and that steadiness has paid off”

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PEOPLE

INDUSTRY ICON launch ATB Investor Services, the wealth management arm of ATB Financial.

The Alberta-based company is an offshoot of the Alberta Treasury. It is a well-known, much-loved and respected financial institution in the province. The firm is known for a radical client-first philosophy – as a company spun out of the government, it seems to know that the people it serves are the reason it exists.

ATB’s business practices flow from that understanding, even when it has mean’t breaking from dodgy practices that are common at mainstream firms. The company’s Clear-Cut Mortgage Rate plan gets rid of dirty tricks of the trade like huge prepayment penalties that can shift the value of an entire mortgage. The firm doesn’t use these fees, as some firms do, as a way of protecting the firm from interest rate risk.

ATB also stopped selling so-called principal-protected notes (PPNs), which, in the wake the 2008, crash were heavily promoted by the big banks. These market-linked GICs promised a percentage of market gains while protecting principal, but many in the industry criticized the notes as a product “designed to fail.” The notes are profitable for those who sell them. But complex rules, undecipherable averaging formulas and ‘dividend exclusion’ clauses mean’t the performance of these products has been dismal. ATB took the product off the shelf of its advisors. The company has developed a devoted following among clients as a result of this unique corporate culture. It is a lesson Mezei would take to Mawer – culture really does matter.

Secrets of success This past year was a special one for Mawer, marking 40 years since its founder, Chuck Mawer, first opened the doors on one of the first investment counselling firms in western Canada. At the time, some questioned whether it was possible to do sophisticated money management from Calgary. Those worries were ridiculously unfounded. The company has expanded recently, opening offices in Toronto and Singapore. But “Calgary is the hub,” says Mezei. “You can invest from anywhere. We find there is a good pool of talent out here.”

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“Flying in an airplane should be boring.

Heart surgery should be boring. Investing should be boring” Jim Hall, Mawer CIO Susan Hall, Mawer’s second employee, is still active with the firm today, and she still talks about Chuck’s legacy of ‘doing the right thing.’ Today, those at the firm strive to follow the example and live up to the culture.

There is another secret ingredient to the Mawer formula that Mezei mentions. The firm is extremely stable in terms of ownership and employee turnover. In an era of comeand-go employees, and bonuses that drive short-term thinking, Mawer is a controlled by its own internal investment professionals.

In 2014, Mawer remained 100% independent, owned by 37 of the 115 individuals who work at the firm.

Being 100% internally owned provides organizational stability and closely aligns the interests of the firm with those of its clients.

This also helps the firm find, attract and, most importantly, retain top talent. Mawer currently has 39 CFA charter holders employed at the firm – and they stick around.

“Going back to foundational stuff … independence is important for us,” Mezei says.

“This is a critical factor to our success. We also have a 99% employee retention rate.

People really care about working here. I think that’s rarer and rarer these days. For the pension guys, they like to get the same person on the phone year after year.”

It all goes back to that disciplined, unconflicted, ‘do the right thing’ kind of culture.

There are no other firms Mawer has to ‘satisfy.’

The employees like working there. The talent tends to stick around. What’s not to like? You can almost hear Mezei, a casually spoken, chill kind of guy, shrug. “We just work really hard,” he says. “It was nice that the win came at the time it did.”

TIMELINE TO SUCCESS

1980

The company first begins offering Mawer mutual funds

1999

Mawer introduces a family of pooled funds for institutional investors

2000

Mawer designs and launches TEAM, a tax-effective asset management program for both private clients and wrap programs across Canada; the firm grows to 30 people

2002

Mawer reaches $1 billion in assets under management

2003

Mawer adds Series O versions of all of its mutual funds

2011

Mawer opens its second office, an institutional sales and service office in Toronto

2012

The company is registered with the Securities and Exchange Commission in the US

2013

Mawer opens a research office in Singapore; current assets under management total $26 billion

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1260_

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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FEATURES

COVER STORY: CRM2 CRM2 is here. But don’t despair: There are some big opportunities opening up

MAIN ARTICLE

Are you r e HAS THERE been a bigger change visited upon Canadian wealth management than the new ‘client relationship model,’ the so-called CRM2 regulations? Arguably, no. What the real shape of the industry will be once the final regs are implemented in 2016 is anyone’s guess. But the predictions are not all doom and gloom.

Still, there has been no end to the rumours.

Prognostications of an imminent industry meltdown have been passed around. The disturbing stat that 20% of advisors in the UK have left the industry is also being whispered.

But there are other ways to think about what’s coming. There is a larger story around that 20% stat. (Many of those advisors came back after they retrained). And so the story is not as dire as many have suggested. In that spirit, WP turned to industry thought leaders who are able to point out where the opportunities are in all the confusion.

The experienced perspective Michael Kitces, a partner in the US-based wealth management firm Pinnacle Advisory Group, is a popular and well-known commentator on industry trends. Based on his experience in the US, where the trends being ushered in by CRM2 have been playing out for many years, he has some remarkable observations.

“My general impression of what seems to be happening around the globe is that the forecasts of doom and catastrophe do not seem to be happening,” he says. “Yes, the advisors that were most focused on transactional product sales have suffered. But the ones who were providing ongoing, holistic advice – while they have experienced some shifts in practice models, they have emerged relatively unscathed.

That’s important to keep in mind.”

Kitces admits there is a skew in terms of fallout. Advisors who work with high-networth clients have managed the transition more easily. This is no surprise. These advisors

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r eady to fill the void? are more likely to be running practices that take a fee for assets under administration, rather than a practice that depends on constant product sales. This will be hard to hear for some, but “the more disrupted part of the market seems to be the lower end, where advisors have based their business on transactional services and just sell product. How those clients are served has been put into flux,” Kitces says, pointing to the kind of client sticker shock that comes part and parcel with full fee disclosure.

“They might be paying the same thing as in the past,” he says, “but … some of them now seem to be reluctant to pay once they are aware.” This fact will be a challenge for some advisors. Advisors who churn products in client portfolios to generate fees are in danger.

Advisors who put clients in high-fee products but offer no advice are also vulnerable. These are the practices that will suffer most. This is not necessarily a bad thing, says Kitces. “That creates a chance for advisors who do provide good service to come in and fill the void.”

Filling the void Advisors hoping to survive will want to be the ones filling that void. How will this process play out? According to Kitces, what we’re seeing in the UK, Australia and Canada is like “the early stages of what’s played out in slower motion in the US. When firms move away from a transactional model and move over to an assets-under-administration model, they are charging for assets on a recurring revenue model. When that occurs over a period of time, advisors grow much larger businesses. The average advisor business becomes much larger than transaction-based businesses.”

Here’s why: “You can be an awesome salesman and knock it out of the park every year and bring in half a million a year selling a ton of product. But when you wake up on January 1, your income is at zero again until you go out

and sell a lot more product,” he says. “That means you don’t build a nice office. You don’t build up a team. You wake up every January 1 starting at the beginning again.

“But when I’m charging for assets under administration, I don’t have that problem,” he continues. “I wake up January 1, and I know I have so much money. I begin to build. You get paid less upfront. But somewhere down the road, you get $100 under management. All you have to do is charge 1% on that. You know you have $10 million. You hire staff. You build a deeper team. You have multiple levels of skilled advisors advising different client at different levels. You can segment clients.Eventually you go out and become independent, which is what’s been happening in US.” South of the border, all kinds of companies have popped up to create platforms for advisors who want to move out on their own. This has spurred growth in the industry. Venders come up with solutions for the independents.

More advisors go independent. More companies pop to serve them. This fuels all sorts of

amount of assets under administration an advisor needs to be sustainable comes down.

“As more firms have come in to serve the advisors, more product vendors came into the market,” Kitces says. “The minimums necessary to get serviced get lower and lower. The cost comes down.”

Ten years ago in the US, the prevailing wisdom was that you don’t break away and go independent until you’re at $100 million or $200 million in assets under management.

“Now there are firms that do it at $20 to $50 million,” Kitces says. “The industry has become more efficient. The support ecosystem has evolved. There are more firms catering to these advisors. More advisors go independent. More companies come in to service them. The more companies that come in to serve them, the lower the cost to advisors.”

Could a similar virtuous cycle begin to spin here? The most interesting conclusion from Kitces: The change that could evolve out of biggame shifts like CRM2 in Canada could be bigger and happen faster than anyone is thinking.

“The more disrupted part of the market seems to be the lower end, where advisors have based their business on transactional services and just sell product” spin-off effects. “Association groups, tech groups and vendors emerge to serve these advisors,” says Kitces. “Schwab built a platform for advisors who used to work at a brokerage.

Twenty years later, they have advisor assets of $1 trillion from advisors who worked for brokerage firms.”

Industry evolution Once the culture and the ecosystem evolve, the

“This evolution happened slowly over time in the US. But it’s happening faster in these other countries. This has been going on for 15 or 20 years in the United States. But it’s happening overnight in the Netherlands, Australia and perhaps Canada. These regulatory changes make the shifts more abrupt…but that’s the potential.”

Now, aren’t you looking forward to the future? >>

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FEATURES

COVER STORY: CRM2 ROADMAP

So, where are you?

WP and its team of experts are offering the simplest, most straightforward roadmap to CRM2 the industry has ever seen. Advisors, here is that guide THE NEW so-called CRM2 regulations are a collection of amendments to regulatory document National Instrument 31-103.

That’s the very simple, technical definition.

The fine print, as is so often the case, gets more complicated.

Instrument 31-103 is, itself, a basic bit of paper outlining the obligations of financial market participants. The new amendments to this document lay out a ‘client relationship model.’ The rules come in phases.

According to a commentary provided by the Investment Funds Institute of Canada, the ‘goal’ of CRM2 is to provide investors with timely, easy-to-understand, detailed information about the cost and performance of their mutual funds. By 2016, investors will receive statements showing, in dollar amounts, the costs associated with each of their products. Investors will see how well their investments have performed since they started to invest, as well as the percentage rate of return over several time periods. Fees paid on these investments will also be much more transparent. A description of the important steps follows.

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1

2

MAKE SURE YOUR PREPARATIONS ARE IN PLACE

GET READY FOR THE BIG REPORTING CRUNCH

Phase One of CRM2 has already passed.

On July 15, 2014, dealers had to begin including benchmark information when clients opened new accounts. Dealers also had to disclose any fees before a transaction was consummated, a requirement known as ‘pre-trade disclosure.’ Some of that transparency now includes an explanation of performance benchmarks, as well as disclosure of compensation.

On Dec. 31, 2015, Phase Two comes into effect. Dealers will now have to include book cost, or the original cost of a product, on statements. They also will have to begin to record the information necessary to generate future performance reports. There will be quarterly account statements sent to clients. More ‘position cost information’ will be offered. The market value of positions also will be disclosed.

There have been some minor shifts to the schedule, but a full delay in implementation won’t happen. According to Rebecca Cowdery, a lawyer with Borden Ladner Gervais LLP, the idea of an extension is not quite right. “IIAC is pushing back the implementation date.

But it is only one small implementation date that has been moved from July 15 to December 31, 2015. The expectation is that the new requirements regarding account statements will be shown in the Dec. 31 statements for the last quarter of 2015 … so not that much of a shift.”

The final phase comes July 15, 2016, when dealers will have to begin providing a performance report that shows the percentage rate of return for various time periods using a money-weighted calculation. Dealers also will have to provide a cost disclosure report that shows all fees and charges paid that year, including any trailer commissions received by the advisor during that 12-month period.

All these new reporting initiatives are supposed to be in place by Dec. 31, 2016, when the first performance and cost reports are to be delivered to clients.

From here and to eternity, there will be an annual report on charges and other compensation sent to clients. There will also be an annual report on investment performance and disclosure by investment fund managers to dealers and advisors. Some things to keep in mind: “The new cost and performance reporting disclosure will be at the firm level. This stuff will be in the mail-outs that come from head office – but it will be advisors on the front lines answering the questions,” says Sara Clodman, an IFIC spokesperson. It will be the advisor who’s sitting across the table from the client. It will be the advisor who needs to be prepared to answer any questions that client may have arising from the new levels of disclosure. Advisors will want to make clear to clients that the charges listed in document do not all go to the advisor. A large part of the fees listed will stay at the dealer to pay for the extensive and complex ‘back-end’ operations.

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12/03/2015 1:00:30 PM

3 KNOW YOUR BENCHMARKS Under new reporting requirements, it will be necessary to provide a general description of benchmarks to clients.

This will require advisors to be sure they’re comparing the fund to the right benchmark. An equity fund cannot be compared to a bond benchmark.

According to IFIC materials, it is important that clients understand that a “market index does not reflect the costs of managing and operating a mutual fund.

To compare your mutual fund to a benchmark, subtract the fund costs from the benchmark.” Benchmarks typically use a ‘time-weighted’ formula. After 2016, the statement clients will receive will be a money-weighted index.

4 USE DISCLOSURE AS AN OPPORTUNITY How does disclosure happen? According to IFIC documents, disclosure can be provided in writing or through a discussion. Reviewing the new Fund Facts document with your client is an acceptable way to meet the pre-trade disclosure requirement. Focus on the section of the Fund Facts document, “How much does it cost?” This section describes sales charges, fund expenses, trailing commissions and other fees. In addition, make reference to the section “A word about tax.” Remember, the disclosure meeting should be documented.

The new fee transparency will make clear exactly who is getting what. Advisors who are providing real value for their clients will want to use this as an opportunity. “Although people think CRM2 is about cost and performance, it’s really about value,” says Susan Silma, a partner at advisor consultancy CRM2 Navigator. “If you just talk about cost and performance, it is almost certain to leave a question in a client’s mind about whether they’re getting value for their money.”

The most frequent client complaint is lack of communication, so it is important to have a communication plan for each client or client segment. “Perhaps the most important thing to do to prepare for CRM2 implementation: get started,” Silma says. “While of course you need to think about the data sources to make sure you’ll be able to report the required data, if you wait until the implementation deadlines to create and start telling the value story, it may be too late.”

“The new cost and performance reporting disclosure will be at the firm level. This stuff will be in the mailouts that come from head office – but it will be advisors on the front lines answering questions”

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FEATURES

COVER STORY: CRM2

5 STAY AGILE, ALERT AND INFORMED Don’t underestimate the impact of CRM2. Change is coming to the industry.

Smart advisors will be nimble and will do what needs to be done to adapt. If that means continuing education and new, more sophisticated licenses, so be it.

A senior executive at a fund company put it this way in an interview earlier this year: “CRM2 is going to change things. I think a lot more people are figuring that out. CRM is big. I think that’s a challenge to this sector. When CRM2 comes out and people start to look at their costs, I think they are going to freak out. Some of these will be mutual fund investors.

There are going to be a lot of people looking for answers.”

Some advisors are ready for this; some are not. “There is one group of advisors [who are] out in front of this and welcome CRM2. These advisors are already disclosing their advice costs.

Then you’ve got a group of advisors who don’t know exactly what to do, and need help. These are the ones who are terrified about what’s coming.”

And then there’s a third group. “There is another third of the advisor force that doesn’t have any clue about what’s going on. The CRM2 stuff hasn’t even registered yet. I don’t know if that advisor will be able to adapt quickly enough.

They might be in trouble.” Make sure you’re on the right side of the knowledge debate.

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Some other details to keep in mind: There are more specific disclosure rules for scholarship plan dealers.

“When CRM2 comes out and people look at their costs, I think they’re going to freak out … a lot of people are going to be looking for answers”

When it comes to the costs of products that have to be disclosed: • You must tell the client the actual charges your client will pay for the purchase, or a reasonable estimate if the actual amount is not known at the time of disclosure; details of any deferred charges that might apply; and any trailing commissions that will be received.

• The CSA has gone a step further and are recommending that advisors explain the following terms to their clients during pre-trade disclosure: management fee, sales charge or deferred sales charge options available to the client, any other redemption fees or short-term trading fees that may apply, options regarding front-end loads, and fees related to the client that would arise from changing or switching investments • What is not a part of CRM2 is a ban on trailer fees. There are discussions occurring concerning the abolition of embedded compensation, but that effort is still in the exploration phase. Regulators are currently collecting investment community feedback and data. According to sources, any such ban would not happen for several years, after CRM2 comes into full effect.

www.wealthprofessional.ca

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12/03/2015 1:00:43 PM

S B O J

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2015-03-12 10:40:10 AM AM 27/03/2014 12:01:34

FEATURES

COVER STORY: CRM2 PANEL DISCUSSION

Global fee transparency: Regulatory regimes similar to CRM2 are reshaping wealth management – and advisors – in the UK, Europe and Australia.

Learning from their mistakes and successes is key. So what are the lessons for Canadian advisors?

THE RUMOURS running around the industry concerning the effects of CRM2 have been flying fast and thick. Some wonder if Canada will suffer a decline in the advisor force similar to the UK, where reports suggest a 20% cull. Not likely, according to those in the know on this side of the pond.

The Investment Funds Institute of Canada recently held its annual Leadership Conference.

The event featured a panel of industry executives from Europe, the UK, Australia and the US. To understand what’s happening here, it helps to understand what’s actually happening there.

If there was one key message, it might be this – the Canadian wealth management industry seems rather well-situated to weather any volatility that will result from new feetransparency regulations. It was noted, optimistically, that, unlike other jurisdictions, Canada’s regulatory review wasn’t triggered by a crisis. Financial advisors in this country are still held in considerable esteem. The result: The Canadian wealth management industry has had the luxury of taking the right amount of time to consider options and learn from experiences elsewhere.

The panelists went on to describe the situations that unfolded in other regions. Here is the country-by-country breakdown.

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UK

THE PANELISTS Julie Patterson Head of investment management, EMA Regulatory Centre of Excellence, KPMG (UK)

“[Higher professional standards] are absolutely paramount in any market” In the case of the UK, the financial system is made up of both large banks and small independent advisors, including many former door-to-door insurance sales reps. The unique structure of the UK insurance industry was already under review when the credit crunch of 2008 occurred. The fallout of that crisis prompted a wider look at regulations.

On January 1, 2013, new rules came into effect that applied to all forms of investment advice, including a total ban on embedded fees. Now advisors and clients determine a fee structure. This can be a fixed fee, an hourly rate or a percentage of assets under management. Advisors also are obliged to meet minimum qualification standards.

Why is this change happening now?

Some of the major global reviews began earlier than the 2008 crash. This was the case in the UK. The scandals in Australia drove reform there. But the IFIC panellists sug-

gested another, more interesting reason for the impetus to enact new regulations: In some situations, there was a failure to enforce existing regulations. This contributed to problems for clients. As Australia’s John Brogden noted, the ominously named Storm Financial collapsed and precipitated the review in Australia. That particular company had been investigated three times by market regulators, but nothing became of the investigations. The result has been a more serious regulatory backlash than might otherwise have been the case had regulators taken that firm down earlier.

Lessons and unintended consequences; issues to consider In both Australia and the UK, the combination of a lack of professional standards, education and relatively weak industry self-regulation created serious issues. In Australia, in particular, says John Brogden, “We are in

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the real story Christophe Girondel Global head of institutional and wholesale distribution, Nordea Asset Management (Europe)

John Brogden CEO, Financial Services Council (Australia)

a world of hurt.” Public perception of the advice business is so low Brogden fears there will be difficulties attracting new recruits.

His organization is aggressively pushing for more regulation and enforcement to try to restore public trust.

There is good news for Canadians here— the issue is not so dire in Canada. Julie Patterson, a regulator until she joined KPMG last August, feels the most important gain in the UK has been higher professional standards. “That’s absolutely paramount in any market,” she said, noting that following the introduction of new regulations, the number of UK advisors dropped by about 20%. While many were simply taking the opportunity to retire from investment management, at least some of those “were frankly people who should not have been there in the first place.” Some of the advisors who left the industry have come back once they polished up their education. In the last year, the

number of advisors has increased by 5%, and all of the new entrants are at least minimally qualified.

Consolidation in the industry The “burden of compliance” – the expense and bureaucracy required to follow all the rules – is growing. As a result, the panellists expect to see fewer and bigger players in all sections of the industry, as well as greater concentration in a smaller number of products. This may lead to less innovation. The upside for regulators is that it’s easier to keep an eye on a few big players and products than many small ones.

Consolidation is already happening in Australia, where the banks’ share of the market has gone from 70% to 80% since regulations were introduced. One potential wild card: John Brogden believes that Australia may eventually force a separation between distributors and manufacturers.

Bob Grohowski Senior counsel, securities regulation, Investment Company Institute (US)

The problem with banning embedded fees While there may be issues with embedded fees, the panellists noted that such fees provided access to quality advice for average investors at a reasonable price. Removing them as an option may create new problems.

Barclay’s Bank, for example, has decided to provide advice only to high-net-worth investors. Those with less to invest are being offered a variety of options, such as ‘roboadvisors,’ discount Internet accounts and ‘guided sales’ that provide generalized investment information and advice.

Australia has already put ‘scaled advice’ into place, which limits the amount of advice advisors are obliged to provide to investors who won’t or can’t pay higher fees. According to Brogden, the industry has yet to figure out how to provide quality, appropriate advice to average investors at a price that makes sense for everyone. But he believes it will happen,

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FEATURES

COVER STORY: CRM2

EUROPE

AUSTRALIA

because high-net-worth investors are a limited market.

Patterson says she favours Europe’s emphasis on simple, straightforward disclosure. She went on to praise Canada’s moves in the same direction. She points out that the embedded fee is not necessarily invisible. If it’s clearly disclosed, “there’s a natural limit on it, because if you increase how much you pay to the distributors, [your client will] lose some … return. So there’s a natural alignment and tension of interests here.”

Bob Grohowski pointed out that returns from a fee-based account may look better to

[In Europe], banks “[In Australia], we control 90% of are in a world of the distribution hurt” business, so banning Australia has been one jurisdiction eagerly watched embedded fees would by Canadian advisors. In that country, a series of major scandals involving banks, large investment firms and advisor exams severely damaged the be problematic The case on the Continent is a bit different. Banks control 90% of the distribution business, so banning embedded fees would be problematic, according to panelists. The thinking is that if the bank advisors received no fees from outside manufacturers, the banks would have no incentive to sell anything but their own products.

So, unlike the UK, continental Europe has emphasized more and better disclosure. Recent regulations are designed to ensure that investors know what they’re buying, what they’re paying, who’s receiving that money and what services they should expect in return. There is also an increased emphasis on the advisor’s obligation to ensure that investments are appropriate for the individual client.

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reputation of financial advice. In July 2013, Australia introduced new rules – so-called FOFA regulations – that are similar to those in the UK. As a result, there is a ban on commissions and trailer fees. Now, advisors negotiate their fees with clients; ongoing fees must be re-negotiated every two years and can only be charged if there is an ongoing service.

To deal with the issue of access to advice for ordinary investors, advisors are allowed to offer ‘scaled advice.’ The advice delivered is tailored to a client’s specific needs. Clients also are not obliged to sign on for a full financial plan, and advisors are not obliged to provide comprehensive advice. Next on the agenda for Australia is raising competence and education standards.

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investor – but what if they are actually paying more in fees than if they owned mutual fund shares with embedded fees?

Any regulation has to be applied across all channels One idea the industry in Canada needs to consider: Making sure these regulations are applied across all channels. One of the wisest moves in the UK, says Patterson, was to impose the new rules on all types of investment products and services. “Because if you do it for a [part of the industry], you will necessarily create unintended consequences,” she says.

In Australia, the insurance industry was not covered under the new rules, and a new controversy is already emerging in that business that will likely provoke further regulation. Some advisors here have pointed out that in Canada the new CRM2 regulations are not being applied to funds sold through the insurance channel. This issue was raised by a senior executive at a very well-respected Canadian wealth management firm. His comment was, basically, “If you don’t apply CRM2 to the insurance channel as well, all the mutual fund salespeople will just move over to that channel.”

US

In the wake of the financial crisis, US regulators passed new rules and continue to investigate the best way to protect investors There have been shifts in the United States as well.

In the wake of the financial crisis of 2008, US regulators passed new rules and continue to investigate the best way to protect US investors, according to panelists.

Some of the issues regulators are considering include trailing commissions, fiduciary duty, disclosure and financial literacy. However, many have resisted across-the-board solutions, such as banning embedded fees.

The thinking is that it is in the investors’ best interest to continue to favour a wide range of options for clients. Of course, US investors overwhelmingly favour some form of investment advice, and clients there continue to press for fees and costs that are lower and more transparent.

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12/03/2015 1:01:22 PM

FEATURES

COVER STORY: CRM2 EXPERT INSIGHT

Rocky road to CR M Joanne De Laurentiis, president and CEO of the Investment Funds Institute of Canada, updates advisors on the state of CRM2 implementation – seemingly more on track and more on time than they might think

*Compared to the S&P/TSX Composite Total Return Index. Volatility is measured by standard deviation of the daily returns over the periods June 18, 2008 to March 9, 2009 (Fund: 12.50, Index: 56.01) and April 5, 2011 to October 3, 2011 (Fund: 6.10, Index: 23.11). 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 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 of32CIBCwww.wealthprofessional.ca Asset Management Inc.

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Wealth Professional: Have IFIC members

WP: Did the regulators do a good job in bring-

been able to figure out this complex implementation? What have the major challenges been?

Joanne De Laurentiis: I would say in terms of figuring it out, yes, it’s fairly clear. There’s no guessing. On the question of challenges, this is a fairly robust set of changes. The biggest challenge, I would say, has been building out the new systems necessary to get the data and information that will be presented to the investor. Many of the systems needed to do this are already there. But these systems did not previously talk to each other in the way CRM2 requires. You have to reconfigure the systems.

Until now, the dealer would have data from the fund manager in terms of what the dealer is being paid. But that would be aggregated data. CRM2 is saying, each client you have, [the data] has to be broken out. And this data, the activity in the account, has to be transmitted to the client. So that’s what’s happening is this data has to be segmented. That was a challenge. But I would say they’ve figured it out.

They know what they have to do. And they’re on it. All hands on deck. Everyone’s got their eye on the various dates that need to be met.

I’d say the industry is making a huge effort to fly on time and in the way they should. This has touched every part of the business. The companies have had to write the business rules, and write the policies. It has impacted every part of the business, at the manager level and the dealer, in terms of policy development, in terms of data analysis and in terms of the technical issues. And then you have to test it all to make sure it works. It’s been a lot.

ing this out and taking direction to the industry?

JD: Ultimately, yes, because, what we appreciated ... during the discussion around the rule, there was lots of time to engage. We submitted lots of briefs. Once the rule was done, I think we all al immediately appreciated how big this was.

Then we went to the regulators and said, ‘If you work with us on an implementation …we can all sit around a table and discuss questions and comments and issues. Let’s do that with the CSA, the two SROs, and all the industry participants. So instead of spending time going back and forth between organizations, we can bring up the questions to the committee…it would be really efficient if we could just have a decisions that way.’

I must hand it to them ... they were good on that … they created a committee that fasttracked a lot of issues that might otherwise have taken a lot of time and potentially delayed implementation.

WP: What has the uptake among the industry been?

JD: The uptake is complete. These are rules.

This is a regulated industry. The companies understand that in this business, once a law is passed and the rules come down, you implement. So the [uptake] is 100%.

WP: Are members still feeling confident this will get done in time?

JD: I think yes. Everyone is working flat out.

And I think they’re confident they’ll get it done.

If you look at the way the regulators brought

12/03/2015 1:01:27 PM

R M2? Not so much ($ Value in 000) 15 14 13 Global Financial Crisis 12 11 10 9 8 7

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“All hands on deck. Everyone’s got their eye on the dates that need to be met”

Renaissance Optimal Income Portfolio S&P/TSX Composite Total Return Index

this in, it was clear we needed a certain run room for implementation around some of the challenge bits, the performance reports. So I think there is a high level of confidence that they’re going to be ready.

WP: What do advisors need to keep in mind working through the mid-point of this process?

JD: Our advice to the advisors is that they should just start having the conversation now with investors. In theory, they know what’s going to be required. For a number of advisors, this is not going to be new. Some are already doing this. The best thing advisors should be doing is to start having those conversations.

‘Here’s what the dealers are being paid; this is what your performance looks like in your portfolio.’ They should start those conversations now – and many are doing exactly that.

If there is one bit of confusion … it would be in the cost report. The reports that will go out will show the dealer’s cost, not the advisor’s compensation. There is some breakdown of compensation. But from the investor’s perspective, what they will see is not just the cost paid to the advisor, but the dealer’s compensation as well. It should be explained that this is the cost for the oversight that the dealer does in terms of compliance, but also all the mechanical stuff, the data that goes back to the fund company. It’s not just the advisor. The advisor has to be connected into something.

What’s relevant to the investor is that total cost...but we would not want to give the impression to the investors that all of that money is going into the advisor’s pocket. It is money that gives into operating the back-end and the critical systems.

Learn how Renaissance Optimal Income Portfolios meet real client needs at

realoutcomes.ca

www.wealthprofessional.ca Source: Morningstar Direct as at December 31, 201433

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PEOPLE

ADVISOR PROFILE

DELIVERING ON A PROMISE Dean Colling runs a sophisticated, high-end, discretionary-based practice.

Delivering market-beating equity returns and a high-level service is a good way to keep clients happy THOSE ASPIRING to true success in the advisory industry would do well to imitate the performance of the first vice president and portfolio manager at the Colling Group of CIBC Wood Gundy. The head of the practice, Dean Colling, recently took a few minutes out of his busy day to talk about a great 2014. “Last year was good, obviously. Through market growth and new clients, we added $100 million in assets last year,” he says.

Nine-digit growth in assets under management? Not bad at all.

The credit for the impressive showing goes to Colling himself. His practice is unique in that he is licensed as a discretionary advisor. That means he does the actual portfolio management himself. He’s not just phoning in mutual fund orders. He is doing actual analysis and stock selection. That is, he is an advisor, but he is also his own fund manager.

Colling sets overall investment policy for his clients and runs the core equity portions of their portfolios. He then looks to bring in additional assets such as ETFs, third-party hedge funds or structured investments to support the core. The fixed-income portion of client portfolios is also outsourced to leading third-party managers.

It takes some time to get licensed this way as an advisor. But being a discretionary advisor has its benefits. “It’s the best of both worlds. We’re essentially a boutique money manager, but we can go outside of the platform as well,” Colling says. We have a completely open architecture.”

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His clients are a mixed group of retirees, owners of mid-sized companies and a smattering of senior execs. “It’s a solid client base of good people who we really enjoy working with,” he says. Today, he is doing more comprehensive financial and estate planning than ever. “The long-term planning objectives and investment policy need to be aligned and adjusted on an ongoing basis together,” he says.

But it’s the portfolio management the clients really appreciate. Over the last few years he has delivered – big time – on the client promise by bagging benchmark-beating returns in both his Canadian and US core strategies. “Yes, I’ve been able to put up very strong risk adjusted returns over the years,” he says. “We have had a really good run recently as well, particularly in the US, where we’ve beaten the S&P 500 by a wide margin.” What could be better as an advisor than reporting that kind of performance to clients?

FAST FACTS

Discretionary benefits

Colling labels his approach TOTAL Wealth Management. He prides himself and his staff on taking a holistic review of each client’s needs. The firm provides estate planning, insurance, offshore planning, charitable gifting, business succession planning, trust services, mid-market business sales and divestitures, access to personal and commercial planning, tax assistance and investment strategies.

There are other advantages to Colling’s practice model as well. As a discretionary advisor, he has less day-to-day back-and-forth with clients.

“Clients aren’t calling us all the time,” he says.

“We don’t have to tell [them] about each little change in the portfolio. We craft a mandate and deliver on that. We spend more of our time discussing big-picture objectives and strategies with clients rather than granularity of day-to-day portfolio management.”

ADVISOR TEAM: The Colling Group BROKERAGE: CIBC Wood Gundy LOCATION: Toronto, Ont. TEAM MEMBERS: 5 KEY AREAS OF EXPERTISE:

• Discretionary investment management (equity and fixed income) • Third-party investment management (search, selection and monitoring) • Alternative/absolute return investments (hedge funds/private equity) • Retirement income and estate planning • Business succession planning • Offshore planning

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“It’s the best of both worlds. We’re essentially a boutique money manager, but we can go outside of the platform as well”

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12/03/2015 3:16:02 PM

PEOPLE

ADVISOR PROFILE

That said, the outsize performance creates expectations. Part of being a discretionary advisor is keeping expectations in check. When asked about expectation on market performance in the year ahead, Colling is careful not to boast. “I think returns will be modest,” he says. ““Based on where expected earnings growth is for the S&P, I don’t think we can expect much more than single-digit returns for US equities. Multiple expansion will need to continue to justify anything more and that would be at a time when US dollar strength is starting to impact S&P earnings. For the TSX, the rapid decline in energy prices has been very difficult. As a result, I’ll continue to stay away from any energy exposure until there is more clarity.”

When we interviewed him early in January, he was not convinced we have seen enough economic data to justify higher interest rates in the near term, particularly in Canada. As a result, “we’ll continue to stick to high-quality dividend paying stocks at the core of our strategies,” he says.

income generation has become a key objective for our clients as they age,” he says. “Given that we are at generational lows in interest rates, we need to look to equities and alternative income vehicles to generate more of that income. The challenge is to do so without altering the risk/ return profile of client portfolios. We’ve found a number of ways to do that and clients have really benefited.”

The freedom that comes with running a discretionary practice also brings with it certain responsibilities. But there’s always that payoff

BETTING AGAINST A RATE HIKE

Client satisfaction When asked what his tips are for finding and keeping clients, Colling is direct: “Know the value you bring to the table and be able to clearly and concisely define that for clients. Your process then needs to deliver on that. Clients ultimately stay with us for the long-term because they know that we truly understand their objectives and will go the extra mile for them. We also have a very clear and open channel of communication with them.”

Advisors also need to be confident about their abilities, Colling adds. “I think clients are very confident that my entire team and I stay on the leading edge of industry knowledge and do our homework for them,” he says.

There are some doubts, of course. Colling’s worries revolve around demographics and the radically low interest rate environment. “As most advisors out there would agree, consistent

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when it all comes together, and those solid returns can be included in the client statement.

“Each client brings a unique set of objectives to us, and it’s very rewarding to be able to positively contribute to their lives,” Colling says. “As a result, we’ve developed some great long-term relationships, some over 20 years.

“With the global markets and regulatory environment changing all the time, every day is interesting,” he continues. “It’s a challenge to stay on top of it all, but it’s something I really do enjoy.”

Colling’s biggest victory over the last year, of course, has been the strong returns. “I would have to say that maintaining a commitment to US equities and the US dollar while having very little energy exposure in 2014 helped our clients immensely,” he says. “We also did not believe interest rates would rise last year and structured our fixed-income allocations to reflect that outlook. We spent considerable time earlier in the year outlining our views and setting clients’ expectations for the year ahead. Managing risk is something my group takes very seriously, and I’m proud of our track record in this area.”

This was a remarkable call at a time when every expert seemed to be predicting a rate hike. Colling is also proud of his firm’s performance in delivering on a unified, multifaceted offering for his clients. “Through our CIBC partners, we are able to seamlessly provide them private banking and credit solutions, business

financing and M&A, as well as insurance and trust solutions. We recently helped coach a client through a proposed business sale to a US entity; that was very rewarding for us and, of course, for him in the end.”

Such are the benefits of 21-plus years of experience.

“My years in the business have taught me a lot of lessons,” he says. Probably the most important one is to stay humble and acknowledge what ‘I know’ and what ‘I don’t.’ As advisors, we can’t expect to regularly take macro data and try to transform that into value-added investment decisions. It’s really not a repeatable process and is fraught with risk. Staying disciplined and maintaining a sound investment process independent of external noise is very important. I think that’s been a key for me.

“Also,” he continues, “being very open to new ideas and maintaining a healthy level of scepticism about the opportunities we are presented is also important. Clients need their advisor to be on the leading edge of industry knowledge.” Taking a holistic approach to managing wealth helps, and maintaining “a business that is based on transparent management fees rather than commissions and transaction costs has been very important. It really ensures that our interests are aligned with [those of] our clients.”

His advice for younger advisors: “Maintain a commitment to learning and to refining your process. Tap your peers for good ideas, and share some of yours. Most importantly, surround yourself with excellent people.”

www.wealthprofessional.ca

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FEATURES

GUEST COLUMN

ADVANTAGE CANADA Former Advocis head Harley Lockhart offers an impassioned and very Canadian defense of embedded compensation NOW THAT Australia, the UK and other international jurisdictions have banned embedded commissions, Canadian investors have a decided advantage. They have a choice.

Canadians can choose how their financial advisor is compensated – embedded commission (EC) and/or fees based on assets, time or services provided. The significant part of this choice is that different compensation models provide different advantages for individuals in different wealth strata.

Notice the repetition of the word ‘different.’

In a world that’s sold out to political correctness, the core message is that identifying a difference in someone or something is making a value judgment that one is better than the other. I disagree. Difference is not necessarily a judgment. It can be an incredible strength.

Unfortunately, the actual issues in this debate have become blurred. The proponents of banning or retaining EC have, to a large degree, chosen sides based on the model supporting their own practice. How can someone judge my compensation model as inferior without understanding my clients and the choices they make?

International regulators have structured their financial services industry to suit unique circumstances in their jurisdictions. The pres-

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sure to comply with international changes must be a significant factor in Canada. Nevertheless, our financial platform is different.

For example, super annuation is compulsory in Australia. Perhaps that changes the financial profile of typical advisor clients. Many of my clients would have no resources to save and invest if higher contributions to pensions were compulsory. Maybe Australian compensation practice is not a good model for Canada unless we make fundamental changes to match their economic structure. We are different.

Without judging fees to be inferior, let’s examine the criticisms of ECs. First, that ECs are hidden – but with increased disclosure coming with CRM2, clients will know the actual commission dollars being paid.

Then there’s the claim that ECs create a conflict of interest. Let’s acknowledge that as long as you are compensated in any way, there is an inherent conflict of interest. To suggest commissions are more prone to conflict ignores that any conflict of interest originates in the attitude of the advisor. Have you ever heard of someone paying fees for unnecessary service?

Is that not a conflict of interest?

Advisors will chase higher payouts: In theory, it makes sense that an unscrupulous advisor will base product recommendations on how much is paid regardless of applicability to the investor. If advisors were chasing higher payouts, wouldn’t those funds have the largest inflows? Name one large mutual fund that pays more than almost all of the others.

As for the claim that ECs are excessive, a consistent percentage paid regardless of asset size will result in higher dollars paid for larger accounts. Keep in mind that the dollar size of

The proponents of banning or retaining EC have, to a large degree, chosen sides based on the model supporting their own practice. How can someone judge my compensation model as inferior without understanding my clients and the choices they make? the risk to the advisor is also larger. Is it not reasonable for the investor to pay for the risk?

Smaller accounts with ECs have an opportunity to grow more quickly because of smaller dollar costs. Which is better for a $200,000 account growth – a .8% trailer or a $2,500 (1.25%) annual fee for service? Obviously the problem of a fixed fee is greater for smaller accounts.

In terms of deferred sales charges, some-

times it is in the client best interest to have a deferred sales charge. Delaying immediate gratification takes discipline that most of us don’t have. DSCs may help deter clients from impulsively dipping into long-term savings.

There is a reward for them to not spend money earmarked for the long term. The charge can be the deciding factor in making a more responsible decision.

When fees are more suitable for the client, they have the choice. However, when ECs or DSCs have advantages for the client, don’t they too deserve the choice?

The gap between the wealthy and others is rapidly increasing. To ban ECs would, based on what’s happened in the UK, move advice out of the reach of a large segment of Canadians. Studies have shown that across all economic strata, individuals with a financial advisor do significantly better than those without. Does removing access to advice make sense to anyone?

Is the current compensation model, including choice, perfect? Certainly not. If change is needed, by all means we should change.

Let’s be sure to examine every proposed change, keeping our focus on positive results for investors.

In fact, we are changing now. CRM2 is in the early stages of implementation. How will these changes impact the current investor/ advisor relationships? Shouldn’t we wait to see?

In Canada, investors have an advantage in that they can choose what they consider best for themselves. Surely, those same individuals can choose how their advisor is to be paid.

Advantage Canada. Let’s keep it.

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FEATURES

NEGOTIATION

How to be a better negotiator Contrary to what many people think, negotiation is not about ‘winning at all costs.’ Josh Masters explains that if you take the approach that negotiation is a process where all parties achieve the best outcome, you may well find more success in your dealings with others THE ART of negotiation is one that is truly underestimated in the corporate and small business world. Many professionals are fixated on playing either good cop or bad cop when it comes to sealing a deal. This turns what is actually a science into a gambling game where the high stakes don’t always pay.

The basic premise of negotiation is to work together with another party to achieve an outcome that works for you both – and rather than come from a traditional stance, where there’s a winner and a loser, it’s best to think flexibly.

In closing hundreds of deals throughout my career as a professional property buyer, I’ve learned a number of techniques to master negotiation that will have you getting what you need without damaging any relationships along the way.

Create a third position It’s important to remember that a negotiation is an exchange of energy. Place two people face to face, and they will feel confronted. Pride,

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stubbornness and ego can get in the way because each person feels they’re being threatened personally.

Creating a third position, where both people turn to face the problem, diverts the intense energy of each person away from confrontation and focuses their attention on solving the issue.

Separating the problem from the person avoids any personality clashes and reduces the chance of offending the other person. Rather than reacting harshly to the other party not wanting to budge from their original offer because they’re ‘stubborn and unreasonable,’ you can instead focus attention on the problem. Take personality out of the equation and focus on finding a solution rather than becoming defensive and equally unreasonable.

Look for the ‘why’ Most people will make a decision based on

reason. Finding out what that reason is can be an invaluable strategy, as it gives you the opportunity to create a solution, often in return for what you want. For example, if a colleague has asked for a three-month extended vacation during the business’ busiest time, you can negotiate whether they can work remotely via email during some of this period.

Avoid getting personal No one likes to be attacked personally. Even when you’re negotiating through a third party, you have to assume that this third party may communicate your every word to the person you are trying to settle a deal with. So keep it polite and remember that you’re trying to get them to cooperate.

Playing the blame game or reacting negatively will work against your goals. Even when something doesn’t go your way, stay calm and

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be respectful, and remember that you may lose in the short term, but as long as your eye is on the prize, your long-term goals should come to fruition.

You also need to avoid thinking the worst of the other party. For example, just because they request that you make an upfront payment before receiving the goods does not mean that they’re going to steal your money. This can be difficult, as you don’t necessarily know the background of the person you’re dealing with in a negotiation. However, assuming the worst of the other person will rarely be productive – and remember, they may actually be thinking the same about you!

Be flexible The more flexible you can be toward the other party, the more likely they will be willing to give you what you want.

If you can decide what you want before you go into the negotiation, such as your best offer and what terms you can and can’t waver on, you often can give the other party what they want without having to sacrifice your position.

Think of the other person At the end of the day, a negotiation – however brief – is a relationship. If you fail to consider the other person’s feelings or what they want, then it’s unlikely you will have much success.

If they are resolute about particular terms of the negotiation, it can be beneficial to withhold your judgment and put yourself in their shoes. Is there a reason why they’re being so firm? Is there something important to them that you haven’t considered? After all, you might very well do the same thing if you were in their position.

Having some empathy for the other person often will ease the pressure in a negotiation – enough to get them across the line on the other things that are important to you.

Using ‘if’ One of the secrets to a successful negotiation is to never give anything up without asking for something in return, even if it’s small. Using ‘if ’ through your negotiation is a good way to handle this.

• If I give you … then I would like …

• I’m happy to give you … if …

• If you can … then I’d be more than happy to...

Use silence One of the most effective ways to negotiate is to stay quiet. This may not be appropriate in situations where there are five other parties all trying to win over your potential customer, but it can be invaluable when the other party is poised on a favourable outcome.

Creating a third position, where both people turn to face the problem, diverts the intense energy of each person away from confrontation and focuses their attention on solving the issue When you remain silent, you automatically get the ‘ball in your court,’ so to speak, which leaves you with the power to make the next call. In the meantime, the other party waits in anticipation, hoping that they may achieve their outcome. This can create the impression for the other party that the negotiation process may soon end with a good result and they can walk away happy. When you do come back to the table with a counter offer, their anticipation of closing the deal immediately will make them more willing to sacrifice items that they may have fought hard to get earlier, all because they’ve seen the light at the end of the tunnel.

Silence can be useful for difficult negotiations, as it can give the time needed for both parties to ‘cool off.’ Sitting back can give you the perspective you need to get a better understanding of the situation and provide you with a long-term view.

Avoid any confusion Sometimes it can be difficult to draw the line between offering help and asking for business, especially with people with whom you have developed a relationship within a casual setting.

If you feel that you’re approaching a level of information that you feel you should be charging for, it can be handy to say things like, “Call me if you would like to work together on something,” or “This is the sort of information I often provide to my client base.” That way you’re being clear on your expectations for the future, without severing the lines of communication altogether.

Strike a pose While most of us have come across as an overbearing tyrant trying to win power by force, an equally destructive force can be approaching a negotiation lacking confidence and presence.

Harvard’s Amy Cuddy has a wonderful presentation on conveying ‘presence’ in front of peers, which shows that it can be as simple as the way you hold your posture before you enter the room. Two minutes with your head up, shoulders back and hands on hips can provide the confidence you need to stand your ground and muster the courage to ask for what you want.

The biggest misunderstanding surrounding the art of negotiation is in its actual definition.

It’s important to remember that negotiation is not used to get the best deal possible or get the most out of someone for the least amount of budget; it’s about coming to the most positive outcome for all parties involved. The origin of the word negotiation comes from the Latin term negotiates, meaning ‘to carry on business,’ and with the right techniques, you will carry on closing deals, securing clients and building relationships.

With more than 15 years of experience in the industry and hundreds of property purchases under his belt, Josh Masters is one of Australia’s most respected buyer’s agents. Learn more at www.joshmasters.com.au

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FEATURES

STRATEGY

Change or die 5 ways to keep your business relevant Even the greatest and most successful businesses need to adapt and change in order to stay relevant, or else face obsolescence.

It’s about anticipating, preparing for and embracing change when needed. Michael McQueen reveals how to do it IN THE early 1930s, with the world in the grip of economic depression, a Danish widowed father of four had a vision. Despite the grim fiscal outlook, Ole Kirk Christiansen purchased a small toy shop in the town of Billund and launched a modest business with the name Leg Godt (Danish for ‘play well’).

Christiansen was a pioneer from the outset – his was the first toy business to embrace a new technology called plastic. Within a few short years, Lego, as the company was now affectionately known, had become the toy of choice for children worldwide.

In the years that followed, Lego evolved and grew. From simple plastic blocks to the release of playsets and the invention of the little yellow man, the company innovated its way to the position of undisputed leader in children’s play.

Until the late 1980s, that is.

As new generations of children began opting for video games rather than plastic playsets, Lego was faced with a dilemma. The company began an 11-year loss stretch – losing $500 million in just two years at their worst point.

By the late 1990s, the casual observer may have been justified in predicting that Lego had run its course and was a dead brand walking.

And yet, the story was far from finished.

Recognising the need to embrace the digital age, Lego’s strategy was informed by the old

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adage: If you can’t beat ‘em, join ‘em. Lego entered a series of licensing arrangements with well-known movie franchises such as Star Wars, Batman and Indiana Jones to create their own co-branded video games. Buoyed by the success of this new direction, Lego expanded their digital offering with the 2010 release of a massively multiplayer online game Lego Universe.

More recently, they have developed smartphone apps that allow users to build Lego shapes while sitting on the bus.

There is little doubt that Lego today is more powerful, profitable and relevant than ever – the recent release of their blockbuster movie is testament to this. In contrast, Lego’s one-time rival Meccano has faded into obscurity.

What can we learn from Lego?

So, what can other brands and businesses learn from this story of adaptation and reinvention?

I would suggest that in order to win the battle to stay relevant over time, organizations and leaders must consistently be willing to do the following: 1. Recalibrate While an appetite for change is critical to stay-

ing ahead of the curve, it is important to discern which fundamentals in an organization should never change.

Just as it is necessary to determine which walls are load-bearing when renovating a house, leaders must identify non-negotiable values, principles and purpose. Tamper with these ‘load-bearing’ fundamentals, and everything may come crashing down.

Before embarking on any change agenda, it is vital to first recalibrate an organization with its core DNA and allow this to be a guidepost for strategy and a touchstone for decisionmaking. In the case of Lego, the company’s leadership never lost sight of Lego’s core purpose of inspiring play, creativity and imagination amidst their digital reinvention.

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SHAKY TIMES: 10 ENDANGERED BRANDS 2. Refresh Any gardener knows that regular pruning is necessary to maintain the health and vitality of a garden. In the same way, organizations require regular pruning of initiatives, traditions and even people who are inhibiting future growth. While pruning can be painful and even disruptive in the short-term, it is nonetheless critically important.

Consider how Sony CEO Kazuo Hirai has recently embarked on a series of necessary pruning initiatives. In the face of $6.4 billion loss for 2012 and a dramatic downgrade of Sony’s credit rating, Hirai recognized that he would need to act quickly to turn around the ailing tech giant’s fortunes.

and organizations to continually re-engineer their internal systems and processes. Too often, being ‘in a groove’ can easily turn into a rut, and simply repeating the habits that have worked in the past can set you on a collision course with inefficiency and irrelevance.

Speaking to this point, Paul Raines, CEO of electronics retailer GameStop, said it well: “In order to survive, a company’s internal rate of change has to be greater than the external rate of change.”

5. Reposition As times and needs evolve, so must the positioning of businesses and brands. This could mean developing new products and services,

Every year, 24/7 Wall St, which provides critical online analysis and commentary for US equity investors, identifies 10 US brands that it predicts will disappear within a year’s time.

Among the selection criteria are declining sales and losses, disclosures by the parent of the brand that it might go out of business, rising costs that are unlikely to be recouped through higher prices, and companies that have lost the great majority of their customers. Last year’s list included:

Just as it is necessary to determine which walls are load-bearing when renovating a house, leaders must identify non-negotiable values, principles and purpose His first step was to end Sony’s decade-long marriage with Swedish mobile phone company Ericsson. Next, Hirai spun off any Sony-owned non-core companies, dramatically streamlined manufacturing processes and cut Sony’s global workforce by roughly 10,000 employees.

3. Reframe We were all raised to believe the lie that great minds think alike. Nothing could be further from the truth! The greatest and most creative minds have always thought very differently from their peers and the prevailing wisdom of their era. Being able to view the world from a different frame of reference is, in fact, the key to innovation and invention.

Leaders must pay particularly close attention to the views and perspectives of those who have fresh eyes in an organization – often owing to their lack of experience. Such fresh eyes have no trouble thinking outside the box because they have no idea what the ‘box’ even looks like yet.

4. Re-engineer Keeping pace with change will require leaders

tapping into new markets, or completely overhauling a brand’s messaging.

To see a brilliant example of a repositioned brand, look no further than 160-year-old glass manufacturer Corning.

In 1908, half of Corning’s revenue came from making glass bulbs. Over time, the Corning brand extended beyond these roots and became known for its high-quality cookand kitchenware. Today, however, many of Corning’s most lucrative products are ones that didn’t exist 10 years ago. The company now specialises in cathode-ray tubes, fibre optics for high-definition TVs, and laser technology that enables mobile phones to be fitted with micro projectors.

Corning is a great example of a company rich in tradition and history that has stayed relevant by not being afraid to embrace new products and services as times have changed.

Setting a brand or organization up for enduring relevance involves a principle that every experienced surfer understands well. In order to catch the perfect wave, a good surfer knows the importance of keeping their eyes

firmly on the horizon. While a wave is still forming a long way off in the distance, surfers know that this is the time to move – to paddle out and get in position. Move too late or not at all, and you’ll simply get washed up as the wave crashes over you.

In much the same way, winning the battle for relevance is about anticipating, preparing for and embracing change – no matter how uncomfortable or confronting it may be. As Charles Darwin once observed, “It is not the strongest that survive, nor the most intelligent.

Rather,” he said, “it is those who are most responsive to change.”

Michael McQueen is a leading business commentator and four-time bestselling author. His most recent book, Winning the Battle for Relevance, explores the critical importance of reinventing an organization or brand before you are forced to. For more information, visit www.michaelmcqueen.net

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FEATURES

STRATEGY

10 lessons from a small business owner Most people go into business for themselves because they want to be their own boss and believe they can make more money. While this can be true, it doesn’t happen without hard work. Blaise van Hecke reveals 10 lessons she has learned MANY PEOPLE like the idea of being a business owner, but they end up just buying themselves a job. Ask yourself why you want to be in business. Being good at something doesn’t mean you’ll be good at running a business … but if you work out how to run it effectively, you can create the lifestyle you desire, and none of it will feel like work.

After more than 15 years owning and running a small business, these are some of the many things I have learned: Find your niche Be specific about what you do – it makes it much easier to sell it to the target buyer. For instance, we are in the business of helping people self-publish their books.

There are many people doing the same thing; our point of difference is that we customize the publishing services to suit the customer, while offering top face-to-face service.

1

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Have a clear purpose for your business Once you know what you’ll do, you can then make a strategic plan for how you’re going to move forward. Think ahead to 12 months, two years and beyond. If you don’t have some kind of plan, how will you know where you’re going?

2

Invest in yourself It’s a great idea to get some advice and training in how to run a business. You can get advice through your local council, and there are many short courses available, too.

Never stop learning. Whether you have been in your industry for five or 50 years, there is always something to learn, so invest in yourself.

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4

Take calculated risks Playing it safe might be a good way to

Anyone who tells you that running a business is easy and that you will make your fortune overnight is delusional.

It will get easier, and it can be very fulfilling

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Marketing is something that you should live and breathe every day – it’s about how you and your staff answer the phone and the presence you have in all avenues of media, online or in print, as well as in your local community.

Taking risks is very important. They may not always pay off, but if you don’t try, you may be left behind

Engage your market through your story People like to deal with people. How many times have you bemoaned the fact that you can’t get a real person to talk to on the phone? You should be accessible and engage people through your story, whether it’s your actual business or you as the face of your business. An ideal way to do this is to write a book about what you do. This is a great way to leverage your story and your business by positioning yourself as an expert.

8

Take action Nothing happens unless you take action. You can’t start up a business and expect the customers to flow in. You need to work on it every day, especially in the first few years when you need to position your business in an already existing market.

9

Work hard but have fun

10 Anyone who tells you that running a exist in the business world, but you need to be careful of being superseded by your competition or by new technologies. For this reason, you need to aim to be at the forefront of your industry. Taking risks is very important. They may not always pay off, but if you don’t try, you may be left behind.

Learn from your mistakes You may take a calculated risk that doesn’t pay off. Don’t beat yourself up about this. Learn from it.

5

Surround yourself with experts As a business owner, you should be spending the majority of your time working on your business. If you don’t like doing your bookkeeping, why waste time doing it?

Delegate tasks that stop you from going out there and gaining more business.

6

Attend to marketing every day Many people think that marketing is making a few pretty brochures and doing a letter drop or creating a website, but these are merely ways to promote your business.

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business is easy and that you will make your fortune overnight is delusional. It will get easier, and it can be very fulfilling. If it gets to the point of no longer being fun, get advice on how to improve. Otherwise you may as well go back to working for someone else.

Blaise van Hecke is the publisher and co-owner of Busybird Publishing. She is also the author of The Book Book: 12 Steps to Successful Publishing. For more information, visit www.busybird.com.au

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PEOPLE

CAREER PATH

CARING FOR CLIENTS

How Rona Birenbaum, one of Toronto’s most successful fee-based advisors, managed to make it work in the heart of the country’s biggest city

One of the reasons that Birenbaum chose to make Queensbury Strategies the home for her investment advisory practice was that the firm supported her desire to launch a fee-only financial planning company.

In 2000, she launched Caring for Clients.

2000PRESENT CARING FOR CLIENTS After a couple sales gigs, Birenbaum finally found the brokerage for her in Queensbury Insurance Brokers, and it led to big things on her end.

“The focus was all about the clients. They were the number-one purpose for what we do, and there was no sales or products. The advisors were helpful, and it was less competitive. I’d arrived.”

2000

“It was challenging to get consumers . . to pay for advice. You’d tell them advice was $1,500, and in response, they’d say they could get it for free somewhere else. So communication and education became really important to show my value and grow the business.”

DEBUTS AT QUEENSBURY

1998

Birenbaum left the credit union, only to discover that the change she was looking for and the level of service she wanted to deliver 1996 wouldn’t get her very far.

BECOMES A “I was coming to the terms that I was just a ROOKIE ADVISOR salesperson really, and now in any kind of advisory role. I hit all my targets and did what I had to do, but it wasn’t the kind of financial planning I entered the industry for. I got my CFP license and all my insurance certificates after that and decided to leave.”

Birenbaum unlocked her passion for business and the financial industry in 1986 while studying at York University in Toronto.

“I went to the Schulich School of Business, and I was working part-time and going to school part-time. It took me about five years, but I got it done, and, sooner than later, I was ready to start my career. I wanted to help people – that was the biggest thing, but the first couple years weren’t always about that.”

Finally in with a big player, Birenbaum thought this was her chance to make a difference, but soon realized she MOVES TO was getting much of the same.

CIBC WOOD “It was really more of what I didn’t like. It was a much bigger GUNDY sales machine, so to speak, and they didn’t want me to focus on a fee-for-service model. The focus was about asset-gathering, and I wanted solutions, not sales.”

1991

ENTERS THE INDUSTRY

1986

DISCOVERS HER PASSION

After completing her schooling, Birenbaum started working for the Hepcoe Credit Union, which is now the Meridian Credit Union.

“I started as a teller, and within five years, I was the branch manager. I always wanted to help people, but the job was more based towards sales and at the time, I wanted to be more entrepreneurial, so after five years, I decided it was time for a change.”

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PEOPLE

FAVOURITE THINGS

SHAFIK HIRANI Calgary advisor, Investors Group

Tropical getaways, Big Macs and Oprah – these are a few of Shafik Hirani’s favourite things

Favourite sport Badminton is one of my favourites because I was number two in high school. I was pretty good. I also really enjoy Brazilian jiu jitsu. I work out a lot and I enjoy combat sports. I train twice a week in Calgary.

Favourite food A Big Mac. Why? Because it’s a Big Mac; need I say more?

Favourite drink I’ve been trying to stay away from the alcohol lately, but when I do, I enjoy beer, wine and shots. A green smoothie is also pretty good, too, post-workout at the gym.

Favourite vacation spot I’ve been a lot of places, but I’d have to go with Bora Bora. It’s just beautiful out there. It’s also where my wife and I spent our honeymoon. I think that St. Regis is the most beautiful place on earth.

Favourite celebrity Oprah, hands down. No one can tug on my heartstrings like her. She always resonates with me on a deeper emotional level and is the only person who has brought me to tears with some of her perspectives.

Favourite music I love electronic music. It boosts my mood; I love to dance, and it makes me run faster at the gym.

Favourite book I’d have to go with How We Decide by Jonah Lehrer. It’s a book about how neuro­science helps us to make the best decisions – feelings and reason and the other things that go into the decision-making process. The book helped me to learn about not only philosophy but myself.

Favourite movie I have a lot of favourites, but I’d have to say Limitless with Bradley Cooper and Robert DeNiro. It’s about this guy who, with the help of a mysterious pill, can tap into 100% of his brain’s abilities. I really like it because I want that to be my life.

Favourite thing about working as an advisor Life is about purpose, and purpose cannot be self-gratifying. We must be in this to make a difference in people’s lives financially and emotionally.

48 www.wealthprofessional.ca

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Morningstar Awards 2014 ©. Morningstar, Inc. All Rights Reserved. Awarded to Vanguard Investments Canada Inc. for ETF Provider of the Year, Canada. The hypothetical example does not represent any particular investment. The cost savings reflect a comparison between Vanguard ETFTM fees and average Canadian mutual fund fees.

The comparison is based on a 6% annual return, an initial investment of $250,000, an average 2.01% MER for mutual funds and an average 0.22% MER for Vanguard ETFs™. The MERs are asset-weighted as of December 31, 2013. Vanguard ETF MERs were sourced from the Management Reports of Fund Performance. The mutual fund industry MERs were sourced from Investor Economics. Without waivers and absorptions, the Vanguard ETF MERs would have been higher. Vanguard Investments Canada Inc. expects to continue absorbing or waiving certain fees indefinitely, but may, in its discretion, discontinue this practice at any time. For more detailed information visit vanguardcanada.ca. Inflation and other potential costs are also not considered. Commissions, management fees, and expenses all may be associated with investments in a Vanguard ETF. Investment objectives, risks, fees, expenses, and other important information are contained in the prospectus; please read it before investing. ETFs are not guaranteed, their values change frequently, and past performance may not be repeated. Vanguard ETFs are managed by Vanguard Investments Canada Inc., an indirect wholly-owned subsidiary of The Vanguard Group, Inc. © 2015 Vanguard Investments Canada Inc. All rights reserved.

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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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