Wealth Professional 7.07

WWW.WEALTHPROFESSIONAL.CA ISSUE 7.07 | $12.95

WEALTH TECHNOLOGY Six ways to take your tech offerings to the next level

FLIGHT TO FIXED INCOME

Options for investors who are eager to escape market volatility

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TAKE ADVANTAGE OF SEASONAL INVESTING The benefits of a fund that rotates investments based on seasonal trends

THE LOWDOWN ON LIQUID ALTERNATIVES How – and why – to get your clients in on the ground floor

23/08/2019 4:13:38 AM

An ETF for All Seasons

HAC Horizons Seasonal Rotation ETF

A rotating portfolio that seeks to anticipate seasonal opportunities.

Learn more at www.HorizonsETFs.com/HAC

Commissions, management fees and expenses all may be associated with an investment in the Horizons Seasonal Rotation ETF (the “ETF�) managed by Horizons ETFs Management (Canada) Inc. The ETF is not guaranteed, its value changes frequently and past performance may not be repeated. The ETF may have exposure to leveraged investment techniques that magnify gains and losses and which may result in greater volatility in value and could be subject to aggressive investment risk and price volatility risk Such risks are described in the prospectus. The prospectus contains important detailed information about the ETF. Please read the prospectus before investing.

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ISSUE 7.07

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

CONTENTS

@WealthProCA facebook.com/WealthProCA

UPFRONT 02 Editorial

Reaching out to female investors

04 Statistics

36

The ETF tide has turned back toward fixed income

THE FUTURE OF ADVICE

08 News analysis

06 Head to head

Should the Bank of Canada follow the Fed’s rate-cut lead?

FEATURES

24

What trends will shape the financial advisor’s role in the years ahead?

38

12 ETF update

Fidelity takes an active approach to ESG investing

14 Alternative investment update Hedge funds are entering a new era of collaboration

LEADERS IN WEALTH TECHNOLOGY

PEOPLE

INDUSTRY ICON As the head of the NEO Exchange, Jos Schmitt is boldly going where no exchange has gone before

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16 Opinion

How to dive into liquid alternatives FEATURES

THE TIME OF THE SEASON

How one offering from Horizons ETFs takes advantage of seasonal trends to capitalize on high points in the market

FEATURES 44 Global opportunities

Where to find global real estate exposure in an ETF package

PEOPLE 40 Advisor profile

Kelly Hemmett is a major advocate for technology in financial planning – but not at the expense of relationships

47 Career path

FEATURES

42

HIGH FIVE

BMO Global Asset Management is shining a spotlight on five of its best income-generating ETFs

he h d

10 Intelligence

This month’s big movers and shakers

SPECIAL REPORT

A tech-savvy practice is a must for advisors who want to survive in the 21st century. WPC takes a closer look at six of the technology options available to advisors today

Investor interest in the alternative space is growing

From law to financial planning, Christine Van Cauwenberghe has always prioritized a holistic approach

48 Other life

Taking the stage with actor and portfolio manager Sean Moir

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23/08/2019 5:06:00 AM

UPFRONT

EDITORIAL

What female investors want

J

ust a few decades ago, a single income for a family was the norm. Today, it’s almost a necessity for both partners to generate income. With that has come more wealth in the hands of women. This demographic has traditionally been underserviced by financial advisors in the past, but it can no longer be ignored.

There are some staggering statistics that back that up. First, there’s the estimate that women will control half of all personal wealth in Canada by 2026, according to the 2017 Investor Economics Household Balance Sheet Report.

That includes women who are single, divorced or widowed, as female baby boomers continue to outlive their spouses. The Journal of Financial Service Professionals reports that 70% of women who have been widowed leave their financial advisor within a year of the death of a spouse.

The underlying theme is that advisors haven’t been adequately meeting women’s financial needs

wealthprofessional.ca ISSUE 7.07 EDITORIAL

SALES & MARKETING

Managing Editor Joe Rosengarten

Director, Client Strategy Dane Taylor

Editor Darren Matte Writers Libby MacDonald Leo Almazora James Burton Executive Editor Ryan Smith Copy Editor Clare Alexander

CONTRIBUTORS Andrew Torres Mike Adams

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

Sales Executive Alan Stewart Vice President, Sales John Mackenzie Project Coordinator Jessica Duce

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

EDITORIAL INQUIRIES

darren.matte@keymedia.com

While that number can be attributed to many different factors, the underlying theme is that advisors haven’t been adequately meeting women’s financial needs. Because men predominantly handled their family’s financial affairs in the past, it’s left a disconnect between women and advisors. That’s why it’s important for advisors to start having conversations with entire families, not just a single contact. Getting everyone comfortable and engaged in the planning process is key for advisors to establish a long-lasting relationships with families.

Another area of note is the percentage of family income earned by women, which continues to increase. In 2015, Statistics Canada reported that female earnings accounted for 46.7% of family income, and the percentage of women who earned more than half of their family’s income had risen to 40.9%.

With these figures both set to rise over the next few years, it’s more important than ever for advisors’ relationships to encompass female family members.

Opening a dialogue to determine their needs and expectations will be instrumental for advisors to ensure their own long-term success.

The team at Wealth Professional Canada

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

23/08/2019 4:58:00 AM

Global Real Estate & E-Commerce “An actively managed global real estate portfolio is a good way to diversify and enhance yield”

DIVIDEND FUND

TSX Symbol: GEC.UN

DEAN ORRICO President and Chief Investment Officer, Middlefield Capital Corporation TSX Symbol: IDR

Global Real Estate Class MID 600 | 649 | 650 | 601 TSX Symbol: RCO.UN

5-STAR RATING (MORNINGSTAR)

(L to R) JEREMY BRASSEUR, Managing Director, DEAN ORRICO, President and Chief Investment Officer, and ROB LAUZON, Managing Director and Deputy Chief Investment Officer

CALGARY

812 Memorial Drive NW Calgary, Alberta T2N 3C8

TORONTO

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

LONDON

288 Bishopsgate London, England EC2M 4QP

TSX LISTED FUNDS | ETFS | MUTUAL FUNDS | RESOURCE FUNDS

SAN FRANCISCO

One Embarcadero Center Suite 500 San Francisco, California, USA 94111

WWW.MIDDLEFIELD.COM 1.888.890.1868

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. You will usually pay brokerage fees to your dealer if you purchase or sell units/shares of investment funds on the Toronto Stock Exchange or other alternative Canadian trading system (an “Exchange”). If the units/shares are purchased or sold on an Exchange, investors may pay more than the current net asset value when buying and may receive less than the current net asset value when selling them. There are ongoing fees and expenses associated with owning units or shares of an investment fund. An investment fund must prepare disclosure documents that contain key information about the fund.

You can find more detailed information about the fund in these documents. Investment funds are not guaranteed, their values change frequently and past performance may not be repeated.

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UPFRONT

STATISTICS

The ETF story so far Volatility-shy investors made fixed income the star of Canada’s ETF landscape in the first half of 2019 ONGOING MARKET volatility has prompted investors to take a defensive stance toward their portfolios. That has led to an increase in the popularity of fixed-income ETFs, which have seen their inflows and market share rise in 2019. As of the end of June, close to $6 billion had flowed into fixed-income ETFs, and five of the top 10 ETFs by inflows are in the fixedincome category.

$181.3 billion ETF AUM in Canada at the end of the first half of the year

On the equity side, the defensive approach was equally evident: Low-volatility and fundamental factor ETFs saw some of the biggest gains. Meanwhile, lingering tariff disputes have helped create outflows in Canadian financials, energy and basic materials. But as certain sectors suffer setbacks, others are picking up the slack, allowing the ETF industry to hit a new AUM record of $181 billion in June.

$5.64 trillion ETF AUM globally at the end of the first half of the year

715

Total number of ETFs in Canada

ASSETS CONTINUE TO CLIMB Despite volatile markets early in the year, ETF assets under management in Canada have grown by nearly $20 billion over the past six months.

As consumers have reacted to the volatility, equity products have lost a bit of their market share to fixedincome ETFs.

6,736

Total number of ETFs globally Sources: CETFA, ETFGI, as of June 30, 2019

THE LION’S SHARE

THIS YEAR’S TOP 10

In the first six months of the year, fixedincome ETFs brought in almost twice as many assets as their equity counterparts.

A look at the top ETFs by inflows so far in 2019 also demonstrates the recent popularity of fixed-income options. Not only do bond ETFs occupy the top three spots on the list, but they also comprise half of the top 10.

ETF INFLOWS, FIRST HALF OF 2019

TOP 10 CANADIAN ETFS BY INFLOWS 1. BMO Aggregate Bond Index ETF (ZAG) $914 million

$5.98 billion

2. BMO Core Plus Bond Fund ETF (ZCPB) $818 million 3. Vanguard Canadian Aggregate Bond Index ETF (VAB) $635 million 4. BMO S&P 500 Index ETF (ZSP) $621 million 5. First Asset MSCI Canada Quality Index Class ETF (FQC) $522 million

$3.12 billion

6. iShares Core MSCI EAFE IMI Index ETF (XEF) $507 million 7. iShares Core Canadian Universe Bond Index ETF (XBB) $479 million

$1.23 billion

8. CI First Asset Morningstar Canada Momentum Index (WXM) $473 million $6 million

9. BMO Ultra Short-Term Bond ETF (ZST) $464 million

Commod­ Inverse/ ities leveraged

10. PIMCO Monthly Income Fund (PMIF) $417 million

$34 million

Fixed income

Equity

Multiasset

Source: National Bank of Canada June 2019 report, Bloomberg

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Fixed income Equity Multi-asset Source: National Bank of Canada June 2019 report, Bloomberg

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2.8%

2.8%

29.0%

2.9%

28.6%

29.1%

JANUARY Overall assets

MARCH Overall assets

FEBRUARY Overall assets

$164.1 billion

$172.9 billion

$169.0 billion 68.2%

68.6%

2.9%

68.0%

3.0%

28.8%

3.1%

30.0%

30.1%

APRIL Overall assets

MAY Overall assets

$178.7 billion

JUNE Overall assets

$177.9 billion

$181.3 billion

68.3%

67.0 % Equity

Fixed income

66.8 %

Other (commodities, multi-asset, currency)

Source: CETFA, as of June 30

ETF WINNERS AND LOSERS

SECTOR UPS AND DOWNS

Drilling down into specific product types, Canadian aggregate bond ETFs have seen the largest share of inflows so far in 2019, followed by foreign fixed-income products. On the equity side, cap-weighted ETFs reign supreme, although low-volatility and fundamental factor products have also garnered considerable investor interest.

Equity ETFs have seen considerable outflows compared to fixed-income products; financials, energy and basic materials have taken the biggest hits, due in large part to ongoing tariff disputes.

1.5 $1.267 billion 1.2 0.9 0.6 0.3 0.0 Cap-weighted -0.3 -.06 3.5 3.0 2.5 2.0 1.5 1.0 0.5 0.0 -0.5 -1.0 -1.5

YTD FLOWS, EQUITY $421 million

$633 million -$39 million

Dividend/income

Low-volatility

CANADIAN EQUITY ETF FLOWS BY SECTOR, FIRST HALF OF 2019

$497 million Multi-factor

-$297 million Fundamental factor

$53 million Thematic

Sector

$3.488 billion

Canada aggregate Canada government

$852 million Canada corporate

Basic materials: -$190 million

$1.395 billion $461 million US/North America

Real estate: +$316 million Healthcare: +$48 million

YTD FLOWS, FIXED INCOME

$826 million

Financials: -$429 million

Utilities: +$131 million -$1.102 billion

Foreign

$63 million Preferred/convertible

Sub-investment grade Source: National Bank of Canada June 2019 report, Bloomberg

Energy: -$246 million Technology: +$88 million Source: National Bank of Canada June 2019 report, Bloomberg

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23/08/2019 3:38:51 AM

UPFRONT

HEAD TO HEAD

Where should the Bank of Canada go on interest rates?

Rumours have been swirling that the BoC will cut rates by the end of the year – but is that the best course to stimulate growth?

Michael Hewson

Brian D’Costa

Michael Dehal

Chief markets analyst CMC Markets

Founding partner and president Algonquin Capital

Senior vice-president and portfolio manager Dehal Investment Partners, Raymond James

“The simple solution would be to cut interest rates, but how necessary is it at this point? Given the dialogue surrounding rates in the US recently, both from the Fed and the industry more broadly, it would have been surprising if the Fed didn’t cut rates by at least 25 basis points, though the data doesn’t suggest that cuts beyond that would be warranted.

In Canada, the economy has been progressing relatively well on its own, and unless the Fed cuts rates drastically, there is no real need for the Bank of Canada to do anything but hold rates steady for the months ahead.”

“US inflation is sub-2%, allowing the Fed to focus on full employment. Because global trade tensions are a risk to growth, the Fed could cut rates by 50 basis points over the next six months as a kind of insurance; cuts are easier to reverse if not needed than dealing with a recession.

The Bank of Canada should approach cutting rates and fuelling a further increase in consumer debt cautiously.

Inflation is 2%; the economy is growing slowly, but it will indirectly benefit from Federal Reserve rate cuts boosting US growth. The BoC can leave rates where they are as long as the currency doesn’t strengthen.”

“The best course of action for the Bank of Canada and US Fed in order to simulate growth would be to cut interest rates. As we have seen in the last 10 years, when both the BoC and the Fed began cutting interest rates in 2009, both economies experienced tremendous economic growth, including historic low unemployment rates and record high equity markets as companies have been able to fuel growth with low borrowing rates.

As both economies are still under their target inflation rates, interest rate cuts can avoid potential busts to the economies and sustain healthy growth.”

A SERIES OF UNFORTUNATE SETBACKS Two consecutive months of surprise job losses and a July rate cut from the US Federal Reserve have led to talk that the Bank of Canada might soon follow suit. According to Statistics Canada, the jobless rate increased by to 5.7% in July after a period of record lows earlier in the year. On the heels of the news, the loonie waned to around 75 cents to the US dollar. Doug Porter, BMO’s chief economist, told Reuters that the job losses are “on the disappointing side of expectations. Of course, you can never read too much into any one month, but this is the third setback in employment in the past five months.” The BoC has held its cards close to its vest since last October and is not anticipated to change that behaviour for the rest of 2019.

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ETF Watch

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UPFRONT

NEWS ANALYSIS

Alternative interest rises After proving their resilience amidst volatile markets last fall, alternative investments are increasingly earning a place in investors’ portfolios

SINCE THE markets took a dip in the fall of 2018, investors have been looking for ways to combat volatility. Combined with new regulations that went into effect earlier this year, allowing fund providers to introduce alternative mutual funds to the retail channel, this has led to an increasingly larger role for alternative investments in the average investor’s portfolio.

Performance has also played a part. The equal-weighted Scotiabank Alternative Mutual Fund Index has seen a year-to-date return of 3.56%, while the asset-weighted and equal-weighted versions of the Scotiabank Canadian Hedge Fund Index have seen 3.71% and 5.87% returns, respectively. According

“If we look at hedge funds and alternative mutual funds specifically, they have been performing well,” Van Wyk-Allan says. “What is more interesting is the volatility. If you compare the volatility, it is a fraction of the S&P/TSX Composite, as well as the S&P 500.”

The chance to dodge market volatility seems to be resonating with advisors, too.

David Little, senior investment advisor at Little Wealth Management Group at HollisWealth, a division of iA Securities, says the market volatility witnessed last fall has given him an entrée into conversations about alternatives with his clients.

“When you look at the volatility last fall, the mandates of these alternative funds show that

“More firms that were historically considered traditional asset managers are [now] entering the alternative investment space” Claire Van Wyk-Allan, Alternative Investment Management Association to Claire Van Wyk-Allan, director and head of Canada for the Alternative Investment Management Association [AIMA], IIROC dealers have been actively promoting alternative investments, and the AIMA has witnessed positive inflows over the last six months.

8

you want to have them in portfolios,” Little says. “They have an equity component but not beta to the market. That non-correlation allows for growth but also protects if there is a market drop.”

So far in 2019, one of the trends that has

stood out for Van Wyk-Allan in the alternative investment space has been an increase in customization and collaboration as institutional investors partner with hedge fund managers, which she says has a knock-on effect in the retail channel.

“As managers increase partnering with institutional investors, collaborating with them on solutions and adjusting fees, we have seen lowered management and performance fees in the retail channel,” she says.

In addition, 2019 has been the year of increased product development in the alternative space, thanks to the easing of regulations in the retail channel.

“More firms that were historically considered traditional asset managers are entering the alternative investment space,” Van Wyk-Allan says. “I know that, in the pipeline, there are large traditional asset managers looking to enter the hedge fund space. This trend I would expect to continue.”

While there has been a recent explosion of

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ALTERNATIVES VERSUS EQUITIES AND BONDS YTD RETURN Alternatives

Equities

Bonds

Scotiabank Alternative Mutual Fund Index

3.56% Scotiabank Canadian Hedge Fund Index (asset-weighted)

3.71% Scotiabank Canadian Hedge Fund Index (equal-weighted)

5.87% S&P TSX Composite

14.38%

S&P 500 (USD)

17.35% S&P 500 (CAD-adjusted)

12.68% DEX 91-Day Treasury Bill Index

0.81%

DEX Universe Bond Index

6.50% Source: Scotiabank Canadian Hedge Fund and Alternative Mutual Fund Index overview, as of June 30, 2019

product options, Little says he hasn’t allowed that to drive his strategy. “We are snobbish – we don’t get caught up in the noise,” he says.

“Alternative products are the new 2019 thing.

We look at the companies that have been in the space, not just the ones creating a product

getting investors familiar with the concept of alternative investments; he’s found that being able to hold up institutional investors as an example helps his cause.

“The problem with clients is that when you explain alternatives to them, it is sometimes

“We try to tell [clients] that alternatives’ lower volatility can put them in a better position. That seems to solidify their comfort level” David Little, Little Wealth Management Group for the retail market. Alternatives are only new to the retail space, but they have been around on the institutional side. So while everyone has a product now, we look at those with experience.”

For Little, the biggest challenge is still

difficult to understand,” Little says. “We like to mention how the Canadian Pension Plan Investment Board has approximately 20% of their investments in alternatives. We try to tell them that alternatives’ lower volatility can put them in a better position. That seems to

solidify their comfort level.”

That’s also something Van Wyk-Allan emphasizes when educating advisors and investors on alternatives. “If I look at the allocations of Canada’s largest institutional investors, their allocations to alternatives range from 25% to 50%, and their constituents are regular, everyday people – not what you would consider ultra-high-net-worth. It is important, when we think about capital preservation and investors preparing themselves for retirement, to think about alternatives as part of that insurance on their portfolio.”

Both Van Wyk-Allan and Little believe that alternative allocations will continue to grow, especially if another market downturn is in the cards.

“I think alternatives are a great thing because they focus on good returns in volatile conditions,” Little says. “Certainly last fall proved it, and I think you’ll continue to see the demand for them with an inevitable market slowdown.”

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23/08/2019 3:56:18 AM

UPFRONT

INTELLIGENCE CORPORATE ACQUIRER

TARGET

PRODUCTS COMMENTS

Broadridge Financial Solutions

RPM Technologies

RPM’s enhanced mutual fund and deposit manufacturing capabilities will become part of Broadridge’s Canadian wealth management business

CIBC

Cleary Gull

CIBC’s acquisition of the Milwaukee-based boutique investment banking firm is expected to close in the fourth quarter, pending regulatory approval

Fiera Capital

Natixis Investment Managers Canada

Fiera Capital has acquired Natixis’ Canadian operations and funds; Natixis Funds will be rebranded as Fiera Investments

PARTNER ONE

PARTNER TWO

COMMENTS

INFOR Financial

Questrade

The partnership gives Questrade’s retail brokerage customers access to INFOR Financial’s new investment options

NEO Connect

Peak Investment Services

Through an integration enabled by Univeris, Peak has become the first mutual fund dealer to offer its advisors direct access to NEO Connect’s platform-traded funds

Mackenzie rolls out new EM bond index ETF

Mackenzie Investments has launched the Mackenzie Emerging Markets Bond Index ETF (CAD-Hedged). Trading on the TSX under the ticker symbol QEBH, the fund invests primarily in USdenominated government and government-related bonds from emerging markets, seeking to replicate the performance of the Solactive EM USD Govt & Govt Related Bond Select CAD-Hedged NTR Index. QBEH’s exposure to EM debt gives investors the opportunity to obtain higher yield and better diversification, and its 0.45% management fee is the lowest among Canadian-domiciled EM bond ETFs.

Partnership gives advisors direct PTF access

Peak Investment Services has partnered with NEO Connect to become the first mutual fund dealer in Canada to offer all of its advisors direct access to platform-traded funds. NEO Connect enables fund manufacturers to offer funds at a lower cost to mutual fund dealers and their advisors. The platform currently distributes close to 70 PTFs from seven fund providers, including both prospectus and offering memorandum funds.

“The most efficient way to transact mutual funds at the lowest cost has been inaccessible to a large segment of the financial advisor community and their client investors – until now,” said NEO Connect president and CEO Jos Schmitt. “We are proud to partner with Peak to launch this new offering. This is a win for the advisors, a win for their dealers and, ultimately, a win for their investing clients.”

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New RBC portfolios take on home-country bias

RBC GAM has launched RBC Global Portfolios, promising investors an efficient and costeffective way to diversify beyond Canadian holdings.

Actively managed and tactically rebalanced, the five portfolios – which range from very conservative to all equity – are composed of mutual funds managed by RBC GAM and BlueBay Asset Management, as well as RBC iShares ETFs. “RBC Global Portfolios bring together the unique strength and expertise of our 22 investment teams located around the world, and RBC iShares ETFs, to provide clients the global solutions they are looking for,” said RBC GAM’s Doug Coulter.

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PEOPLE Evolve adds 5G category to innovation ETF Evolve Funds Group has expanded its Evolve Innovation Index Fund (EDGE) to include a 5G category, giving Canadian investors the opportunity to participate in the next wave of mobile connectivity. As global carriers invest billions in the development of the 5G network, Evolve believes the technology is on the brink of disrupting the global economy.

According to Evolve president and CEO Raj Lala, “5G technology will deliver much faster connection speeds with less latency and greater reliability. This will help fuel a huge rise in Internet of Things technology, allowing for a smarter and more connected world.”

SSQ Insurance introduces smart beta portfolios

SSQ Insurance has launched four Smart Beta Plus Portfolios. Each portfolio – conservative, balanced, growth and aggressive – has a smartbeta core with active satellite strategies. The core is composed of foreign investment funds with exposure to global investment-grade and high-yield bonds, as well as US, emerging market and global equities. The satellite portion, meanwhile, is composed of Canadian bond and equity funds that aim to outperform their benchmarks – something SSQ says is feasible given the relatively smaller, less liquid and less efficient nature of the Canadian market.

CI Investments launches high-interest savings funds

CI Investments has rolled out the CI First Asset High Interest Savings ETF (CSAV), along with a mutual fund version. With exposure primarily to highinterest deposit accounts, the funds are designed to maximize monthly income while preserving capital and liquidity. The funds give investors exposure to high-interest savings accounts with a yield of approximately 2.1%, creating a compelling alternative to holding cash. Both funds have a management fee of 0.14% and come with the benefit of daily liquidity and no lock-up period, allowing investors efficient access to their cash savings.

NAME

LEAVING

JOINING

NEW POSITION

Alain Bergeron

Mackenzie Investments

iA Financial Group

Executive vice-president and chief investment officer

John de Goey

N/A

FP Canada Research Foundation

Chair, board of directors

Alan MacKenzie

Triovest Realty Advisors

JLL

CEO of Canadian markets

Paul Sandhu

N/A

Marret Asset Management

President, CEO and chief investment officer

Michael Thom

N/A

CFA Societies Canada

Managing director

Abe Toews

N/A

Advocis

Chair, board of directors

Fixed-income veteran named head of Marret

Marret Asset Management has appointed Paul Sandhu as its new president, CEO and CIO following the retirement of Barry Allan, who founded the fixed-income management firm and led it for 18 years. Sandhu previously spent a decade as vice-president and portfolio manager for Marret. His 30 years of fixed-income investing experience also includes stints at BMO Capital Markets, Goldman Sachs and Citibank in Europe, the US and Canada.

“Marret has a well-earned reputation of being one of Canada’s top fixedincome investing boutiques,” Sandhu said. “I look forward to leading the firm to continued investment excellence and growth.”

JLL announces CEO of Canadian markets

Commercial real estate firm JLL has named Alan MacKenzie as CEO of Canadian markets. Based in Toronto, Mackenzie will lead JLL’s adoption of new technologies across Canada. The three-decade industry veteran comes to JLL after a three-year stint as president, CIO and COO of Triovest Realty Advisors.

“I look forward to growing JLL’s current business, expanding into new verticals and focusing on delivering high-end products to our new and future client base,” MacKenzie said. “I am impressed by JLL’s investment in technology and innovation, and I look forward to leading the company’s future advancements in this field.”

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23/08/2019 3:56:48 AM

UPFRONT

ETF UPDATE NEWS BRIEFS Leveraged and inverse ETFs have supervisory shortfalls

A review by the North American Securities Administrators Association, a consortium of US and Canadian securities regulators, has uncovered supervisory risks in a number of leveraged and inverse ETFs. The organization looked at 86 broker-dealers that allow leveraged and/or inverse ETFs in retail customer accounts and found that only 59% addressed the review of customer suitability. Meanwhile, only 45% provided mandatory training to registered representatives on such products, and just 19% had written supervisory policies and procedures focused on concentration limits.

Canadian ETFs experience second-quarter rebound

After posting their lowest first-quarter sales total in five years, Canada-listed ETFs generated $6.9 billion in net creations during the second quarter of 2019, according to the Canadian ETF Association. ETF assets closed out June at a high-water mark of $181.3 billion, though that growth was curtailed by the anemic 1.9% growth in the S&P/TSX Index. Fixed-income ETFs also saw a record in quarterly sales – investmentgrade bond ETFs posted $4 billion in net creations, while high-yield bond ETFs brought in $281 million.

ETF portfolios present a challenge to strategists

According to new survey from Cerulli Associates, 77% of US-based ETF strategists said that competition from issuers offering their own managed portfolio strategies was their most significant challenge in 2018, up from just 33% in 2016. As fund providers roll out ETF portfolios with more competitive

12

fees, Cerulli suggested that ETF strategists need to offer niche strategies to deliver a compelling value proposition.

Partnerships with existing issuers, it added, might also become more important for strategists to understand broker-dealer platform gatekeepers and due diligence processes.

ETF flows point to lifestyle shift toward ESG investing

Between June 2018 and June 2019, US investors poured US$4.7 billion into ESG-focused ETFs, according to an analysis by Lara Crigger for ETF.com – well above the US$2.6 billion in inflows ESG products witnessed during the entirety of 2018. However, Crigger noted that more than half of that amount went to low-cost, broad-based core ETFs. That runs counter to expectations that the space is dominated by thematic ESG ETFs, which had flat to negative flows for 2019. Crigger said this suggests that investors are looking at SRI “not as a thematic play but as an investment lifestyle, hoping to convert some or all of their existing asset allocations to more ethically acceptable alternatives without sacrificing market performance.”

Investors race to get rid of ETF products with higher fees

According Bloomberg data, 58 ETFs in the US were liquidated in the six months leading up to June — the worst-ever start to a year for the ETF industry since 2009. All the funds closed during the first half of 2019 had higher fees, Bloomberg said, with an average charge of $6.20 for every $1,000 invested. In contrast, more than 70% of inflows observed during the same period went to funds that charge $1 or less in management fees. “This particular outbreak in the fee war was the most violent I’ve ever seen,” said Bloomberg Intelligence analyst Eric Balchunas.

Getting active with ESG investing Fidelity’s new ETF represents the next step in the trend toward sustainable investing

The pressure’s on for the investment industry.

Investors no longer care exclusively about preserving capital and generating healthy returns. People are now listening to the whispers of their conscience and putting values at the forefront of their investment decisions.

“We’re starting to see demand come from all angles,” says Andrew Clee, vice-president of ETFs at Fidelity Investments Canada. “Ultrahigh-net-worth individuals, looking back at their years of success, are wanting to put some money behind ESG-friendly companies. Young investors like millennials, meanwhile, are taking their future focus beyond having a good retirement to retiring in a better world.”

While many asset owners and managers are hearing – and heeding – calls for portfolios that exclude alcohol, firearms and other so-called ‘sin sectors,’ socially responsible investing is maturing beyond passive negative screening.

“Some active managers go for ESG integration, where ESG factors are a consideration, but not the end-all-be-all, in the investment process,” Clee says. “Some pursue thematic investing, focusing on a narrow area of ESG. There’s also impact investing, which aims for measurable progress in addressing societal or environmental challenges. The spectrum is changing over time.”

Fidelity is making inroads in two areas.

One is thematic investing, represented by

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its US-equity-focused Fidelity Women’s Leadership Fund. The other approach, bestin-class investing, is embodied by the Fidelity Sustainable World ETF (FCSW), which recognizes ESG concerns but doesn’t necessarily write off entire sectors or industries. “We’re trying to go above and beyond just a purely passive ESG strategy,” Clee says.

Starting from a universe of around 2,500 stocks, Fidelity looks for the highest ESG performers relative to industry peers. “We do

“We’re trying to go above and beyond just a purely passive ESG strategy” avoid some smaller sectors with a ‘sin’ label, like alcohol,” Clee says. “But we also believe certain industries shouldn’t be excluded. In energy, for example, some of the best-inclass players are focused on oil and gas, but they’re also recognizing the need to get off fossil fuels in the coming decades, so they’re spending a ton of research and development on renewable energy.”

After finding around 1,000 of the best-inclass ESG-friendly companies, Fidelity picks the ones that have the best opportunity for outperformance using a multi-factor model that considers sector value, cyclical value, profitability, momentum, quality, growth and information flow. The final result is a portfolio of 100 to 300 stocks with a strong potential to outperform the market while also aligning with people’s values.

“I think we’ve created the best of both worlds: an ESG-friendly mandate that has the ability to offer an alpha opportunity,” Clee says.

Q&A

Ahmed Farooq Vice-president, ETF business development FRANKLIN TEMPLETON

Years in the industry 15 Fast fact The Franklin Liberty Core Plus Bond ETF (FLCP) and the Franklin Liberty Short Duration Bond ETF (FLSD) give investors access to active fixed-income strategies

Actively seeking bond stability How would you describe Canadians’ appetite for fixedincome ETF exposure right now?

I would say that it’s at an all-time high; we continue to see record flows in both the US and Canada. In Canada, we’ve seen $10 billion in inflows for this year, with $6 billion from fixed income alone. In the US, US$74 billion has gone to fixed-income ETFs, with US$118 billion for its whole ETF space. I think that all goes back to the volatility we’ve seen in the past six months or so.

When you go back in the history of fixed-income ETFs, the options available were pretty much all passive. Now, a fair number of traditional active managers are getting into the ETF space with active fixed-income products. And it’s during times of uncertainty, or when interest rates start to go up, that the ability to change duration or move to investment grade can make a real difference.

Why should advisors and investors consider expanding their portfolio exposure to fixed-income securities in the near term?

I would say the vast majority of portfolios have been very heavily weighted to equity for the last seven or eight years. But now there are worries about how NAFTA 2.0 will be settled, how the US-China trade war will play out, the ongoing Brexit affair in Europe and upcoming elections in Canada. As all of those issues boil up, it’s starting to look like the market is at a crossroads: Equities may keep rising, or it could be time for a recession. There’s also uncertainty on interest rates – will they stay flat, increase again or start to decrease?

I think that’s why we’re starting to see more investors going into fixed income. But they’re not chasing yield or buying higher-risk products; they’re looking for higher quality, which shows they really want some portfolio cushioning to prepare for risk and volatility.

What benefits do your two new active fixed-income ETFs, FLCP and FLSD, offer investors?

Investors have been telling us that they like our five-star and flagship mutual fund products, but they want them in an ETF format; that’s what we’re delivering here. Investors in these ETFs can benefit not just from a large asset base, but also a long history of proven performance – something new products can’t offer.

FLCP invests in a $1.9 billion five-star mutual fund, the Franklin Bissett Core Plus Bond Fund, and is available at 55 basis points; it’s Canadian-centric at the core, but up to 30% of it can be placed in developed and emerging markets. FLSD, which invests in the Franklin Bissett Short Duration Bond Fund and is priced at 40 basis points, has a similar Canadian core-plus strategy, but its duration is restricted to three and a half years or less.

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UPFRONT

ALTERNATIVE INVESTMENT UPDATE

Hedge funds work toward harmony Fund managers are taking greater care to develop customized solutions for institutional investors

trades through the use of separately managed accounts or co-investments.

“Over the last 10 years, institutions have grown their allocation not just to hedge funds, but also private credit and private equity,” Van Wyk-Allan says. “Pensions have built out their capabilities in these areas and are better able to engage in unique co-investment opportunities alongside managers.”

Will this new focus on customization and

“[Pension funds] are better able to engage in unique co-investment opportunities”

In the decade following the global financial crisis, the investment industry has seen a number of significant trends. Among those is a global movement among hedge funds to align the interests of managers with asset owners.

“Institutional investors, particularly in Canada, have reached a large size,” explains Claire Van Wyk-Allan, director and head of Canada for the Alternative Investment Management Association. “That’s enabled them to create these customized investment opportunities with hedge fund manager talent.”

A priority among institutions, particularly

NEWS BRIEFS

pension funds, is the trend toward responsible investing. With a more long-term and liability-driven attitude than retail investors, pension funds are naturally interested in the sustainability of their investments. That puts the onus on hedge funds to include ESG factors in their due diligence.

“Established manager firms in particular face more pressure to meet that responsible investing requirement,” Van Wyk-Allan says.

Institutional investors have considerable leeway to explore bespoke solutions and can significantly scale their preferred

Canadian venture capital slumps in first half of the year

In its latest MoneyTree report, PwC reported that Canadian companies collected US$1.65 billion in venture capital funding during the first six months of 2019, a 13% decline compared to the same period last year. Deal activity in the VC space also slowed ¬– the first half of 2019 saw 240 deals, a 15% decrease compared to the first half of 2018. “This decline contrasts with global activity, which saw both funding and deal activity climb,” said Anand Sanwal, co-founder and CEO of CB Insights, which contributed to the report.

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collaboration ultimately benefit hedge fund performance? Van Wyk-Allan says the answer will depend on two factors.

“Fund managers have to properly match liquidity,” she says. “That means striking the correct balance between pursuing alpha through illiquidity premiums while ensuring they have the right liquidity required to respect the interests and redemption rights of investors.

“On the other side of the coin, we look at how management fees can be lowered,” she continues. “Operational efficiencies achieved through different means such as technology can certainly help. We’ve also been seeing increased flexibility through the lowering of performance fees and pursuit of alternative fee models.”

Hedge fund investors want to hear about ESG

Research from Cerulli Associates has revealed a communication gap in the hedge fund industry. Forty per cent of asset owners said they wanted quarterly or annual communications on ESG concerns; an overwhelming majority (96%) wanted communications on environmental and social concerns, while 100% wanted to hear about governance. But just 54% of hedge fund managers provide regular communications on ESG; 63% of these reports touched on environmental and social issues, while 74% focused on governance.

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Q&A

Daniel Dorenbush Managing director and head of Canadian prime services SCOTIABANK

Years in the industry 18 Fast fact In January, the oneof-a-kind Scotiabank Alternative Mutual Fund Index was launched to help investors track the performance of Canadian liquid alternative products

Early days for Canadian liquid alternatives From your perspective, how has the performance of Canadian liquid alternative products been so far?

It’s still early days for the space, but we see three interesting observations at this point. First, in May, the [Scotiabank Alternative Mutual Fund Index] fell 1.2% while the TSX Composite fell 3.3%, suggesting that alternative mutual fund strategies offered protection to investors in a down period of the market.

Second, the monthly return numbers have exhibited a lower level of volatility than the broader equity markets, which can help reduce risk in a portfolio.

Third, for the year to June, the Scotiabank Alternative Mutual Fund Index generated positive performance of 3.6%. As one would expect of strategies that hedge, this lags broader markets, which have been on a strong bull run. Hence, to date, I would say alternative mutual fund strategies are performing as expected, and the index reflects that.

Are you noticing any trends in the types of products or strategies that are entering Canada’s liquid-alt fund landscape?

The regulatory changes have allowed additional investment flexibility for asset managers and have broadened the investment options available to end investors. So far, just under 40 alternative mutual funds have launched, with total assets under management of about $3.5 billion. The majority of

Vertex eliminates performance fee for three funds

Vertex One Asset Management has removed its performance fee – which paid the firm 20% of the total return above a benchmark, subject to a relative high-water mark – for three funds. Performance fees have been eliminated on the Vertex Value Fund, Vertex Enhanced Income Fund and Vertex Growth Fund. The Vancouver-based asset manager also raised the risk rating of the Vertex Value Fund and announced that both the Vertex Value Fund and Vertex Enhanced Income Fund will be subadvised

by PenderFund Capital Management.

these funds are equity-focused, with some multistrategy and a few credit-focused funds as well.

What headwinds and tailwinds do you expect alternative mutual funds and ETFs to encounter in the coming months and years?

Alternative mutual funds offer investment managers more flexibility in deploying capital than their traditional counterparts. This allows for strategies that can enhance portfolio diversification and potentially better optimize risk and return for investors. Investors can use alternative strategies to supplement their traditional portfolio holdings and target risk-return profiles they otherwise may not have been able to achieve.

The most significant headwind is likely the educational process. Investors and their advisors need to understand the strategy employed by a specific alternative mutual fund before investing, and this will take some time.

There may be some additional headwinds, including additional proficiency requirements for MFDA-licensed financial planners to sell the products, disparate risk rating and product shelf approval processes by IIROC investment dealers, and the lack of long-term track records. And the strong bull market we are experiencing – which is certainly welcome – arguably makes it harder for the hedging strategies employed by alternative funds to demonstrate their value.

Picton Mahoney enhances liquid alternative lineup

Picton Mahoney Asset Management has added the Picton Mahoney Fortified Income Alternative Fund to its suite of liquid alternative products. In addition to incorporating the firm’s proprietary, rulesbased Fortified Investing approach, the fund uses shorting and other hedging strategies to maximize income and capital appreciation while mitigating capital loss. Picton Mahoney also introduced ETF units of all four of its Fortified Alternative Funds, which are now trading on the TSX under ticker symbols PFIA, PFAE, PFMN and PFMS.

Timbercreek to expand global REIT exposure

Canadian real estate investment firm Timbercreek Asset Management is planning to more than double its global REIT exposure from just over $2 billion to $5 billion. Corrado Russo, Timbercreek’s global head of securities, told Bloomberg that his firm is currently finding better-quality assets in the US, Europe, Hong Kong and Japan. He added that Timbercreek also sees potential in non-traditional properties such as data centres, cell towers, casinos and singletenant buildings.

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UPFRONT

OPINION

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

The liquid alt approach Advisors looking to get their clients into new liquid alternative funds should keep a few things in mind, writes Andrew Torres RECENT CHANGES to Canadian mutual fund rules have spawned a wave of new investment vehicles called liquid alternatives.

We’ve seen more than 50 new liquid alt funds launched in Canada as mutual fund managers clamour to attract new capital. The Canadian Association of Alternative Strategies and Assets estimates that up to $2 billion has been allocated to these funds already.

Proponents say these new funds will revolutionize how Canadians invest, while detractors warn that they will lead to unintended risks as managers add leverage and derivatives to traditional portfolios. So how should the uninitiated approach this new asset class?

First, let’s establish what liquid alternatives are and what they are not. Liquid alternatives are not direct investments in assets such as property, private equity, artwork or wine. Such investments typically cannot be bought or sold on a daily basis.

Rather, liquid alternatives allow managers to use traditional market instruments (bonds, stocks and commodities) in non-traditional ways. Liquid alt funds differ from traditional funds in a few ways, but the most significant are that they allow for the use of leverage and short-selling. Managers who have experience with these tools can use them to create a focused asset exposure that offers an attractive risk/reward ratio.

The problem is that these tools can be downright dangerous if used incorrectly, and not all funds are created equal. Asking a mutual fund manager to use leverage and short-selling is a bit like handing a bus driver the keys to a shiny new Ferrari. They will be tempted to test its

16

limits, and you hope they don’t crash at the first wall. Taking levered exposure to a volatile asset class shouldn’t be the reason for employing a managed alt fund – a margin account will do that nicely and leave you in complete control.

Measuring the performance of a liquid alt is not always straightforward. The profile often does not fit well against an established benchmark index. Strategies can involve holding

strategy to the manager’s prior experience.

Second, keep in mind that the best liquid alternative strategies are not necessarily the ones promising double-digit returns, but the ones that offer competitive market returns with lower volatility. Low-volatility funds can often meet or beat the long-term returns of traditional strategies, but without the peaks and troughs along the way. That can be an attractive substitution for risk-averse investors, but also for risk-tolerant investors who are interested in allocating to high-beta strategies.

A low-beta alternative fund, combined with a speculative asset, can replace core equity to boost potential returns without increasing expected volatility.

Finally, most investors in Canada are exposed to two key risks: stock markets and interest rates. If stock markets are rising and interest rates are falling, both equity and bond holdings are going up in value, and investors are happy. But if rates are rising and stocks are falling, as they did for much of 2018, investors become anxious. An alternative strategy that is

“Asking a mutual fund manager to use leverage and short-selling is a bit like handing a bus driver the keys to a shiny new Ferrari” long and short positions with low net market exposure and may not follow broad markets in the traditional way. When bond and equity markets go through periods of strong performance, as they did in the first half of 2019, alternative investments appear to be underperforming. However, in the right hands, liquid alternatives can offer meaningful diversification while maintaining or even reducing the market beta of an overall investment portfolio.

So how does one best evaluate these funds and the managers that run them?

First, assess the fund manager’s experience in investing with short-selling and leverage. Can they articulate clearly how they use these tools?

How does the manager hedge against downside risks? Seasoned alternative managers will often have a track record of managing similar strategies, such as a hedge fund or a closed-end fund. Consider the similarity of the liquid alt

uncorrelated to one or both those metrics can be a powerful addition that reduces the price swings of an overall portfolio – which means you and your client can sleep better at night.

In the midst of low yields and a mature economic cycle, advisors should welcome the opportunity to diversify away from marketcorrelated risks. You might not feel equipped to evaluate the range of strategies available, but by considering the three yardsticks above, you can uncover some attractive value propositions that offer real diversification and improve the risk-adjusted returns of your clients’ portfolios.

Andrew Torres is the founder and CEO of Lawrence Park Asset Management, a Torontobased alternative fixed-income manager. Torres has been using short-selling and leverage strategies for most of his 30-year career.

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PEOPLE

INDUSTRY ICON

AN EXPERT IN EXCHANGES Jos Schmitt’s career in exchanges has brought him a wealth of knowledge and key lessons that he used as the foundation for the NEO Exchange

MOST OF Jos Schmitt’s 30-year career has been focused on exchanges. He has worked for or had a hand in establishing numerous stock and derivatives exchanges worldwide, most recently creating an alternative to the TSX as president and CEO of the NEO Exchange. He considers this latest project the most rewarding of his career because of the core values that underpin the NEO: always doing what is right for those at the heart of the economy – the investors and the companies seeking to raise capital.

Even at an early age, Schmitt had a sense of where the financial world was going. He did both his bachelor’s and master’s in economics and computer science. That background, along with a fascination with exchanges, eventually led Schmitt to consult on a project with the Brussels Stock Exchange, implementing a computer-automated trading system that would migrate the exchange from floor to electronic trading.

“Some of my most memorable moments were when I walked on the floor of the exchange and experienced that world in full action,” Schmitt recalls.

That’s when he realized the exchange world was where he wanted to be. He visited

18

the chairman of the Brussels Stock Exchange to express his interest in working there and was put in charge of strategy and operations.

“It is a fascinating combination of roles when you think about it,” Schmitt says. “In those days, exchanges were owned by the

to become part of a consortium of brokers and banks working on the design of a new derivatives exchange and clearing house. Before he knew it, he was a CEO at the age of 28.

After that exchange became part of Euronext, Schmitt moved on to building a

“Everything we do is driven by the question, ‘Is this going to be beneficial to investors or capital-raising companies?’ How many companies can truly say that they seek to build their own success solely by doing what is right for their clients and the public interest?” brokers, who were running them with limited capabilities within their organizations. I was given the opportunity to transform one into a real corporation with a vision, strategy and execution capabilities.”

Stepping stones After accomplishing what he set out to do with the Brussels Exchange, Schmitt had the chance

financial services consulting firm, Capco.

He led its capital markets division and was involved in numerous exchange projects across the globe before coming to Canada in 2003. He was working on a large bank business transformation project and planned to stay for a year to get it off the ground. But soon he was setting up an office in Canada and running the North American business of

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PROFILE Name: Jos Schmitt Title: President and CEO/executive director Company: NEO Exchange/NEO Connect Based in: Toronto Years in the industry: 30+ Career highlight: Founding the NEO Exchange on a unique set of values and principles

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PEOPLE

INDUSTRY ICON

his consulting firm. He’s been here ever since.

When Alpha Group, the marketplace he designed, was acquired by the Maple Group to be amalgamated with the TMX and CDS, it was time for Schmitt to move on again. He was contacted by the head of RBC’s global equity trading, who asked if he thought Canada should look at setting up a new alternative marketplace to counter the re-established TMX monopoly.

“My first reaction was that I wasn’t interested in building more of the same,” he says.

“I wasn’t sure it was going to be the solution.”

Instead, he agreed to provide research on

status, they were maximizing returns to shareholders but losing their focus on their core clients: investors and capital-raising companies,” Schmitt explains. “Being the only game in town, they had no reason to address any issues, so it was clear there was a need for a competitor that would address those issues.”

So far, the NEO model has been working.

The exchange now boasts 75 listings of ETFs and corporations that are exclusive to the NEO, and it accounts for approximately 10% of all daily trading in Canada.

“NEO is probably my most exciting professional experience,” Schmitt says. “Everything

“Some of my most memorable moments were when I walked on the floor of the exchange and experienced that world in full action” Canadian capital markets, the role of stock exchanges and some potential solutions.

Interest in his findings erupted.

“They shared it with other firms who wanted to have discussions,” he says. “We had eight institutions who were willing to provide the seed funding to work the paper into a business case [for an exchange]. Together, we became the founders of Aequitas Innovations, the holding company behind the NEO Exchange.”

A new kind of exchange The NEO Exchange officially launched in 2015 with a mission to address the core issues that Schmitt’s original research had uncovered, including liquidity, access to market data, and raising venture and growth capital.

His research also found that high-frequency trading enabled strategies that some parties took advantage of to the detriment of longterm investors. Further, there were many companies going public that probably shouldn’t be, creating another pitfall for investors.

“As TMX was restored to monopolistic

20

we do is driven by the question, ‘Is this going to be beneficial to investors or capital-raising companies?’ How many companies can truly say that they seek to build their own success solely by doing what is right for their clients and the public interest? I’m not saying we are perfect in doing so, but our intentions are 100% genuine, and we will correct course if we took a direction going against our values.”

A year after the NEO Exchange launched, Schmitt oversaw the design and implementation of a new fund distribution platform in Canada, NEO Connect, built around the same values as the exchange. It has shown substantial growth over the past three years, having raised close to $1 billion for the fund manufacturers leveraging it.

Schmitt says his team isn’t done yet – they have many more ideas they plan to unveil, while always staying true to their values.

“I see lots of growth opportunities – opportunities for new products and services and to advocate for changes that will make this market better.”

THE NEO EXCHANGE AT A GLANCE

HEADQUARTERS Toronto, ON

FOUNDED 2015

PARENT COMPANY Aequitas Innovations

NUMBER OF LISTINGS 75

NUMBER OF FUND PROVIDERS 15

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MP 6

SPECIAL REPORT

WEALTH TECHNOLOGY

LEADERS IN WEALTH TECHNOLOGY Technology has changed the game for financial advisors.

WPC takes a closer look at six of the tech tools advisors have at their disposal to help improve their efficiency and add value

ADVISORS ARE on a mission to continuously prove their value to investors. And while some view technology as a threat to their business, others recognize it as a way to enhance their services and improve their efficiency on a variety of tasks – whether that’s through portfolio management, a CRM, back-office solutions or an entire suite of software.

This month, Wealth Professional Canada sat down with a wide range of wealth tech providers to get a glimpse into the current offerings available to advisors. While each provider offers something different, many common themes emerged: improving effi-

24

ciency, helping to create a holistic approach and adding value to the advisor’s role.

Advisors today have many technology options, so it’s up to each advisor to focus on the areas where they feel technology will improve their efficiency and value.

Of course, the need for human advice will never go away – although technology makes it easy for investors to attempt to manage their own investments, the truth is that very few have the financial literacy to accomplish their long-term goals.

Advisors will remain relevant not in spite of technology, but by embracing and implementing it.

TECHNOLOGY LEADERS INDEX COMPANY

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Agora

31

Croesus

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RPM Technologies

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WealthBar

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Wealthsimple

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Brought to you by

The third wave of financial planning Advicent’s NaviPlan software is adapting to the needs of the financial planning industry as it enters its third wave

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“The way we look at it, there have been three waves of financial planning,” says Advicent CTO John Heinen. “In the 1980s and ’90s, financial planning and the technology that supported it primarily focused on pre-retirement and post-retirement cash flows. Advisors were able to use software to look at a client’s situation and build a financial representation of their livelihood now and into the future. Then, in the 2000s, financial planning technology began to place greater emphasis on goals-based planning models, which simplified the financial planning conversation for down-market clients.”

But when planning shifted to a goalsbased model, Heinen says, it lost some of its sophistication. He believes that for fully effective planning, the two waves needed to be synthesized into a new third wave.

“There are three factors in the third wave,” he says. “The first is a recognition that you need both goals-based and cash-flow planning in a financial picture. The second is enabling a client and an advisor to interact in a different way than they did tradition-

ally. The third aspect is giving the advisor a single, consistent planning platform to use for the many types of clients and their needs.”

Technology will be a key driver of the shift to the third wave. Heinen says the old days of meeting an advisor once a year to create a plan, only to shelve it until the following year, are gone. Now, thanks to technology, advisors have more digital touchpoints they can use in their relationships with clients. Each touchpoint creates an opportunity to further engage with clients, broadening the conversation and strengthening relationships.

“Embracing the third wave will help advisors engage with their clients in a way that meets the clients’ needs,” Heinen says.

“Combining cash-flow and goals-based planning creates a more comprehensive picture of a financial situation. If you only optimize one, you can lose critical information.”

The third wave of financial planning will also give advisors autonomy and freedom to understand and meet their clients’ needs.

“In this third wave, they can get information quickly and focus on the outcome rather than the process,” says Paul Raisanen, Advicent’s director of product management.

Both Heinen and Raisanen see technology as a way for advisors to drive their processes, expand their reach and enhance their relationships with clients. By embracing cutting-edge technology, advisors can better make the shift toward the third wave.

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“I think making the shift is about looking at technology solutions within their ecosystem that are going to support the transition in the most effective way possible,” Heinen says. “Advisors need to evaluate and assess solutions that meet their clients’ needs, from early investors to the highly sophisticated, in order to determine the technology solutions that best suit their own needs. These solutions will help advisors communicate their unique strategy and demonstrate their value.”

Through NaviPlan, Advicent is using its proprietary technology to help advisors transition to the third wave and enhance their value to clients.

EVOLVING WITH THE TIMES

70%

of millennials say financial management technology has given them peace of mind and helped them reach their financial goals

67%

of investors globally said they would share more data with their financial institution if it provided greater value to them

79%

of millennials say they prefer to build financial plans using a combination of both automation and a human advisor or entirely with a human advisor

integration capabilities and functionality, to the equation,” Raisanen says. “With that information, advisors can be more comfortable having conversations with their clients and can be confident that they are helping them make good decisions.”

Advicent’s focus on integration is something that Raisanen says sets the company apart. “We make sure we deeply integrate with our enterprise partners, and we make sure that is at the forefront of the conversation, from onboarding and client management to planning and through the fulfillment stages of the process.”

Advicent does this by offering out-ofthe-box functionality and applications that

“Embracing the third wave will help advisors engage with their clients in a way that meets the clients’ needs. Combining cashflow and goals-based planning creates a more comprehensive picture of a financial situation” John Heinen, Advicent “We have continued to advance our capabilities on the planning side,” Raisanen says. “Our private corporation functionality for servicing Canadian clients and new Guided Retirement Experience can facilitate better client and advisor collaboration from the prospecting and engagement side.

We continue to make advancements on both sides of the spectrum with the goal of striking a balance between goals-based and cash-flow planning. That way, the advisor has the flexibility to use either side of the equation to fit the needs of every client, regardless of the client’s fluency in financial matters.”

Advicent’s goal is to establish partnerships with its clients, who can then use its technology to take their own approach to market. “I think when we talk about the ecosystem, regardless of the solution, we want to provide trusted data, along with

advisors can brand with their own message and value proposition. In addition, the company provides APIs that allow digital teams to dive deeper into customization to enhance the client experience.

By providing the tools for advisors to embrace the third wave of financial planning, Heinen believes Advicent is equipping its partners for the upcoming shift in the wealth management industry.

“I think the notion of a financial plan is actually going to go away, and it’s going to be more about giving a client an up-to-theminute, holistic picture of their current financial situation,” he says. “Advisors will have more power at their fingertips by leveraging data in many ways that provide answers and suggestions to their clients.

Their alpha will be provided by the technology that is at their disposal.”

Source: 2017 World Wealth Report, Capgemini

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Tackling independent challenges Croesus is helping independent investment firms optimize their business by providing them with turn-key technology solutions IN TODAY’S fast-moving wealth management industry, data and information are key for advisors and their firms. However, regardless of the size and type of firm, integrating solutions to understand that data can be difficult. Through its tailored solutions, training and adoption support, wealth tech provider Croesus is helping independent firms become more efficient and create their own unique value proposition.

“I think there are two realms that are important for independent firms,” says

Acheson Thomas, Croesus’ senior manager of client relations. “The first is that there is a lot of information available to them and data floating around, whether commentary, social media, etc. So how do they flesh out what is important from what they’re seeing in the context of the market, and how do they understand the data? The other is that there’s a lot of pressure on all firms in the wealth management space from a regulatory perspective.

How do they keep up with the regulatory issues and be compliant? These are two things

we hear from firms of all sizes.”

Keeping up with competitors goes handin-hand with those issues. Thomas believes that incorporating technology will allow independent firms to not only tackle the issues of understanding data and managing compliance, but also carve out a value proposition that sets them apart from others.

“There is a wealth of information, but the data itself doesn’t really do anything,” Thomas says. “How do you use technology to harness the data that is available and make sense of it? Technology helps firms increase their efficiency and assists in streamlining operational processes. Rather than doing repetitive tasks, they can automate them and focus on other things that provide more value.”

However, Thomas recognizes that it’s one thing for independent firms to say they’re going to invest in technology and harness what it can offer, but it’s another to incorporate it into their current business environment. He underlines the need for firms to find technology vendors who can help them implement effective, reliable solutions.

“In terms of looking to incorporate tech-

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nology, it has to make sense for timelines, and getting a particular functionality to market, whether for advisors or clients, can definitely be a factor,” he says. “The other challenge is for those individuals who are incorporating [technology is] how do they balance their priorities if they’re wearing multiple hats? Yet many realize that the upfront expenditure of energy helps them down the road in terms of streamlining processes or gathering data in a more efficient manner.”

Croesus offers a variety of solutions that give independent advisors the ability to do everything from managing portfolios and building portfolio models to calculating performance, generating reports, managing

folio managers get more clients, they want to be able to set objectives and respect the investment policy statements because they need to monitor accounts for compliance purposes,” Poirier says. “So they need a system to tell them when the asset allocation is off so they can rebalance portfolios and keep everything in line.”

These services are just one aspect of Croesus’ business – the other is integrating the services and ensuring that those using them have the right support systems in place.

“It begins by being able to integrate the solutions to business reality,” Poirier says. “Before we provide tools to advisors, we first need to understand how they work. We then apply the

“Before we provide tools to advisors, we first need to understand how they work.

We then apply the software based on their operational processes” André Poirier, Croesus client relationships, simplifying billing and managing documents. The day-to-day features are the ones most sought after by Croesus’ clients, says André Poirier, senior manager of training, documentation and linguistic services.

“Of our services, the most appreciated would be the reports,” he says. “Being able to mine the data that is in the portfolio management software is important to them. They need to be generating [reports] to extract information on a daily basis. This also helps in communicating with clients. They need reports to be a crucial part of the business because clients need to understand how their investments are performing. The highlight of the application is being able to report what you are doing.”

The other feature that stands out for Croesus’ clients is portfolio modeling, which gives portfolio managers the ability to manage and monitor their clients. “As port-

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WHAT CROESUS ADVISOR CAN HELP WITH Managing client accounts

Creating, executing and assigning orders

Compliance verification

software based on their operational processes.

We offer many training solutions tailored to those needs.”

Croesus recognizes that firms have different ways of learning the software, so those solutions include coaching, training materials and webinars, as well as a client services team that can answer questions and provide reference material.

“We work together closely because we want to make sure the portfolio management system is used efficiently,” Poirier says. “We make sure they are getting the features they need based on how they run their business, the clients they have and how they manage their book. The idea is that we work with the firm at an operational level. We understand where they are headed and maximize the system’s functionalities.”

Moving forward, Thomas believes accessing data and being able to interpret it will be invaluable for advisors, and technology

Calculating performance

Identifying business opportunities

Projecting revenue and yield Source: Croesus

will help them do it.

“Being able to make sense of data is a key driver for wealth management,” he says. “Analysis tools such as Croesus Data Analytics help advisors visualize information, understand their business and ensure their clients are where they should be going. It’s a tool that allows practice managers to drive growth through targeted coaching. For teams, making sure they are incorporating datadriven best practices is key going forward.”

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ETF Watch

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Keeping it simple WealthBar’s easy-to-understand approach aims to bring sound investment advice to more Canadians

ROBO-ADVISORS HAVE become prevalent in today’s market – but when Chris and Tea Nicola founded WealthBar in 2012, they were the first robo-advice platform in Canada. Now, seven years later, WealthBar has amassed $350 million in AUM but is sticking to its approach of being simple and easily understandable for its clients.

“When we started WealthBar, it was important that we were clean, simple, straightforward and didn’t confuse the customer with so much analysis that they couldn’t make a decision because they either didn’t understand what was being done or there were too many options,” Tea Nicola says.

WealthBar offers online model portfolios with a low-risk, long-term approach that manages volatility by focusing on broad diversification and generating cash flow.

The portfolios are divided between ETFs and private investments; the ETF portfolios focus on value and offer brand-name funds with low fees, while the private investment portfolios are professionally managed and include investments like private equity, real estate, mortgages, alternative strategies and preferred shares.

“I believe in broad diversification and low-cost index funds,” Nicola explains. “That feeling isn’t prolific because sometimes it’s not the most logical thing to do. It’s because the level of financial education in Canada is very low. I think that there are certain things that influence people, like media, but sometimes the focus is on a single aspect of an industry or product, and that becomes the new truth of what people want to see. For example, active management is a hot word in the financial service industry now, but it can

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be done effectively.”

Dealing with a low level of financial literacy and filtering through noise is why Nicola has sought to keep WealthBar simple and direct. “The financial services industry is relatively complex, so if you can’t boil it down to a simple axiom, it will be hard to attract attention,” she says. “We can have all of the best intentions of doing the right thing for the customer, but when you understand why you are making decision, getting through to the consumer is much higher.”

WealthBar has come a long way since its inception, and seeing the impact it has had is a point of pride for Nicola. “I think what makes me most proud is that we were truly the first robo-advisor in Canada,” she says.

“We had to convince the regulators that we could do this. We wrote the first compliance manual in this vertical in Canada. We collaborated with regulators on what would be the mechanism by which it can exist in Canada.

Now the banks have a version of that, so I am pretty proud that I created something that is now implemented by multinational, billiondollar organizations.”

In addition to its model portfolios, WealthBar has added financial planning and insurance services to its lineup. In 2018, the company became part of CI Financial in order to continue pressing forward with a stronger backing, and Nicola has big plans for the future.

“I would like to be able to help people connect their life and their money in a meaningful way,” she says. “I want to provide Canadians with personal finance solutions – I’d like to have additional products and lines of business to solve personal finance challenges from their phone. It’s a lofty goal, but long term, I think we can get there. The technology is available, the industry is ready, consumers are ready, and it’s just a matter of completing the puzzle to have that seamless experience.”

“I would like to be able to help people connect their life and their money in a meaningful way” Tea Nicola, WealthBar A WEALTHBAR PORTFOLIO VERSUS A TYPICAL MUTUAL FUND WealthBar balanced ETF portfolio

9.3%

Typical mutual fund 5.5% 2.2%

0.9% Fees

Three-year return

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WHAT AGORA OFFERS DEALERS AND ADVISORS Clearing and custody for mutual fund dealers Easy e-onboarding Freedom to move data within the cloud Investor dashboard Model portfolios (subject to regulatory approval) Low and no-fee nominee accounts, allowing client accounts to be consolidated into single nominee account No transfer-out fees when introducing clients Paperless workflow

Putting it all together By combining its own end-to-end solutions with those from third-party vendors, Agora is bringing more options to independent advisors THE FINANCIAL advice industry is a technology laggard in comparison to other industries – and the independent advice channel is even further behind. With a goal of transforming the laggards into leaders, Agora Dealer Services Corporation created a platform that essentially positions the company as an outsourced digital carrying dealer.

“We are a business-to-business model, and we bring our solutions to dealers,” says Paul Morford, CEO of Agora Dealer Services Holding Corp. “The independent advice channel we are focusing on is the laggard of that space. There is a lack of technology to

support them, their services and their clients’ expectations. The point of our model is to accelerate the digital transformation in that financial advice space.”

There are two main areas that Agora’s services and platform aim to tackle. The first is delivering technology via an end-to-end platform that includes onboarding support, cloud-based storage, client management capabilities, forms and more.

The second area Agora is addressing is fragmentation. “The independent channel is very fragmented compared to the banks,” Morford explains. “It’s difficult to get tech-

“Part of our model is to bring technology to dealers, and the other is to recognize the industry fragmentation and do away with it …”

Paul Morford, Agora Dealer Services Holding Corp. nology broadly dispersed through the marketplace and into dealerships. Part of our model is to bring technology to dealers, and the other is to recognize the fragmentation and do away with it to rapidly deploy technology in an efficient and cost-effective way.”

Agora has done this by incorporating third-party services into its platform, which now has a diverse mix of in-house-built and

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-coded products and third-party products.

Morford says it’s all about breaking out software that has traditionally been siloed.

“Part of our model is to support all stakeholders in the space,” he says. “An advisor may have a CRM system, a back-office system and planning software, but they are all siloed, so they can’t get data to move from one to another. We have integrated the software so that data can move between systems.

Everything we design is designed to integrate into a more effective and seamless platform for dealers and their advisors to help with the value proposition to clients.”

That value proposition is fundamental for Agora. While the company’s direct clients are the dealers, its services are designed to trickle down to advisors. Morford believes technology shouldn’t be used to replace advisors, but rather enhance their capabilities.

“We always talk about advisor alpha,” he says. “The more time they can spend providing advice or advisor alpha, the better their value will be. We aim to automate repetitive, low-value, high-volume tasks to free up advisors’ time to spend in front of clients, focusing on things like financial and estate planning and areas they enjoy.”

In addition to its services for advisors and dealers, Agora also aims to use its technology to bridge mutual fund companies and ETF providers to dealers and advisors. “It becomes an interesting link, if done properly, to have them all connected efficiently in one place,” Morford says.

For Agora, the current platform is just the beginning. One of the company’s next projects, pending regulatory approval, is model portfolios that dealers can deploy for their advisors.

“Technology is never going to stop, and that is awesome,” Morford says. “We are really excited about that because the independent advice channel probably can benefit the most from technology to advance its cause. We believe in independent advice for the average Canadian, if it can be presented properly with the right value. With technology, there is awesome stuff coming forward, and we want to help get it into the marketplace.”

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The next evolution in trading Wealthsimple’s new Trade app eliminates commission fees and simplifies the process of trading stocks and ETFs WHEN WEALTHSIMPLE started its online platform back in 2013, its goal was to help diversify Canada’s financial industry and give investors an alternative option for investing.

Since then, the platform has grown tremendously, capturing approximately 72% of the robo/digital advice channel in Canada.

if our clients are building smart investment portfolios with us that are diversified and for the long term, they still like to own a few stocks on the side.”

Trade allows investors to gain exposure to areas they are interested in, such as technology or cannabis, while remaining in the

“We could have launched with commissions and been like everyone else hanging onto this diminishing revenue, or [we could] move the industry forward because this is where it is going – commission-free” Michael Katchen, Wealthsimple Wealthsimple has continued to build on that success, adding its lineup with the ultimate goal of becoming a client’s primary financial relationship.

The latest milestone toward that goal is Wealthsimple Trade, a stock and ETF trading mobile app launched earlier this year. Trade’s key proposition is that investors can buy and sell with no commission fees, no paperwork and no account minimums.

“For us, it was just the next step in our journey of being our client’s primary financial relationship,” says Wealthsimple co-founder and CEO Michael Katchen. “Trade was a very natural place to go next. We know that even

Wealthsimple ecosystem.

“We wanted a responsible platform that helps people invest in ETFs if they wanted to build their own ETF portfolio,” Katchen says.

“I have always said that if you want to manage your own money, that is the best way to do it: build your ETF portfolio, rebalance it and optimize it for tax efficiency. Or, if you want to hold individual stocks, do it in a responsible way. It’s not about day trading or getting rich quick. It’s part of a broader portfolio with your long-term goals.”

One thing Wealthsimple prides itself on is the clean design of the app, which aims to help investors make responsible trading decisions

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by eschewing a noisy news feed and emphasizing calm. So far, the company has received positive feedback: 130,000 people signed up for the pre-launch version of the app.

One of the main drivers of its popularity is the fact that Wealthsimple Trade is commission-free, which is where Katchen believes the industry is heading.

“It was a thoughtful decision after looking at data and trends,” he says. “Commissions used to be $99 20 years ago, then $29.99 and now $9.99 but have been falling for years.

If you look the commission percentage of revenue, it is an increasingly small share. We could have launched with commissions and been like everyone else hanging onto this diminishing revenue, or [we could] move the industry forward because this is where it is going – commission-free.”

For Katchen, the response so far validates the efforts he and his team put into the app. “For us, the way you build products people love is start with what we call MVP – minimum viable product,” he says. “We launch it and start learning. We use that

learning to improve the product and introduce new features.”

In Trade’s case, that meant launching in a simple form that only included taxable accounts, then expanding to TFSAs. “It is that process that leads to products people love,” Katchen says. “The funny thing is the product is never done; you are constantly improving.”

While some have labelled Wealthsimple as disruptive, Katchen has always seen the company as an enabling force in the industry.

He feels technology empowers advisors to meet the ever-escalating expectations of clients, which is why his company launched Wealthsimple for Advisors in 2016, which combines the platform’s many features into a user-friendly interface to help advisors manage their clients.

“If you are a young advisor today who is thinking about building a career in the industry, the question you have to ask is, do you want to align with a legacy platform that doesn’t understand the needs of clients and an industry structure that is changing, or with a technology platform that wants to empower

you to capitalize on the changes and build a practice designed to thrive in the future?”

Katchen says. “That’s why we say we are not trying to disrupt, but rather empower.”

KEY FEATURES OF WEALTHSIMPLE TRADE Unlimited commission-free trades No account minimum Thousands of Canadian and US stocks and ETFs available to trade Fast order execution Watchlist feature to monitor stocks without buying Market and limit orders Available for personal (unregistered) accounts and TFSAs

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A framework for large organizations Large, multi-channel organizations often need help with wealth technology, too – and that’s where RPM Technologies comes in FOR MORE THAN 20 years, RPM Technologies has been providing solutions to MFDA and IIROC dealers and the retail bank sector to help these organizations manage accounts and improve efficiency.

In May, RPM was acquired by Broadridge Financial Solutions, which was looking to accelerate its position as a top wealth tech provider in Canada. Building upon RPM’s

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stellar reputation among clients, Broadridge is working to expand the platform’s reach to banks, broker-dealers, credit unions and mutual fund providers.

“RPM will accelerate Broadridge’s retail wealth strategy, complementing and expanding Broadridge’s footprint and addressable market to include branch-based retail wealth in Canada,” says Donna Bristow,

Broadridge’s managing director and general manager of North American wealth. “The RPM team will bring deep expertise in wealth solutions in the Canadian landscape across a blue-chip client base.”

With more than $650 billion in assets under administration and 15 million customer accounts, RPM’s enterprise-class wealth management software solutions aim to create a holistic, customer-centric platform for multiple investment accounts and products across multiple distribution and manufacturing platforms. At the heart of the RPM platform is R Solutions, a parameterized, modular enterprise solution that can be configured to meet a client’s needs and/or integrated into existing applications.

Within R Solutions is R Wealth, which helps banks and retail organizations sell and service investments; R Broker, a dealer platform; R Funds, a transfer agency for mutual funds; R Term, which facilitates term deposit manufacturing and account administration;

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BEFORE AND AFTER RPM In the silo model

With RPM

One account for each investment type

A single account for all investments

Individual transactions for each investment

Single order bundle spanning investments

Difficult to create a portfolio spanning investments

Out-of-the box portfolios, tailored to customer segment and channel

One PAC/SWP for each investment and multiple debits/credits to customer’s bank account

One PAC or SWP spanning investments and one debit/credit to customer’s bank account

Transfers require redeeming assets and purchasing new assets in the target account

Single-step process – partial and full transfers can be completed without redeeming assets

Multiple statements for each investment and account type

Single statement per account, spanning investments

Multiple tax receipts for each investment and account type

Single tax receipt per account, spanning investments Source: RPM Technologies

and R Wholesale Term, an end-to-end solution for all aspects of the wholesale distribution business for term deposits and highinterest savings.

Within this wide variety of options, Bristow says RPM has something for all wealth professionals, no matter their role in the industry.

“Institution leaders love RPM because the platform is a catalyst for increased market share and revenue growth,” she says. “Technology leaders love it because it improves operational efficiency and productivity while reducing OPEX and system costs.

Business and risk officers appreciate that RPM allows them to effectively stay ahead of the regulatory market. Administrators love RPM because of its wide feature set and the knowledgeable implementation for associates and SMEs. RPM also allows firms to quickly launch new products to the market.

Advisors love us because we have designed a product that makes life easier while adding

“Advisors love us because we have designed a product that makes life easier while adding value at every step of an investor’s journey” Donna Bristow, Broadridge Financial Solutions value at every step of an investor’s journey.”

When designing its solutions, RPM focused on building scalable, componentbased systems that can be configured to meet product and market needs. The software is built on a real-time, highly scalable systems architecture that supports multiple lines of business, investment products, distribution channels and regulatory bodies. Its open architecture includes message APIs to support various channels/devices, along with robust host integration capabilities.

RPM’s solutions help its partners enhance customer service and product capabilities, increase sales, reduce costs, and maintain

compliance. “I think those are some of the main benefits for advisors,” Bristow says.

“With enhanced customer service capabilities, it allows them consolidated account views to act on an investment need, provide more product choices, ensure services are offered consistently and consolidate reports.”

By setting itself apart with its experience, suite of solutions, and integration and customization capabilities, RPM has positioned itself to enhance the capabilities of a wide variety of clients – and being part of Broadridge will allow its solutions to find their way to even more firms across the wealth management spectrum.

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TECHNOLOGY

The future of financial advice WPC talked to Francis D’Andrade, SVP of innovation at Forstrong Global Asset Management, to find out what trends are poised to shape advisors’ jobs in the coming years

THE FINANCIAL advice landscape has changed significantly over the last few years.

Technological innovations have allowed advisors to increase efficiency and ultimately add value for clients by devoting their time to the more important aspects of their

“It is clear that the future of advice is going to be quite a bit different than it is right now – it is clearly going to be much more digitized,” D’Andrade says. “Five years ago, the general sentiment in the financial services industry was that the rise of fintech and

“It’s now generally accepted that future-ready advisors will need to offer a hybridized, high-touch/high-tech solution to clients or risk becoming dinosaurs” Francis D’Andrade, Forstrong Global Asset Management day-to-day business. According to Francis D’Andrade, senior vice-president of innovation at Forstrong Global Asset Management, the adaptation and integration of technology will be a major factor in shaping the way advisors and investors think of financial advice moving forward.

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robo-advisors posed an existential threat to advice. However, to paraphrase, the demise of advice has been greatly exaggerated.”

D’Andrade points to the fact that many robo-advisors now have B2B platforms that offer their services to advisors. “Technology may well have saved advice,” he says. “The

B2B platforms have made it easier for advisors to leverage that leading-edge technology. I think you are going to see a lot more advisors embracing that.”

D’Andrade believes the result will be an industry that incorporates both human and artificial intelligence components. “It’s now generally accepted that future-ready advisors will need to offer a hybridized, high-touch/ high-tech solution to clients or risk becoming dinosaurs,” he says.

This hybridization, D’Andrade adds, will allow advisors to focus on addressing one of the major trends that came out of the 2008 global financial crisis: offering more value to clients. “Initially it was about lower costs,” he says, “but the population has been maturing, and mature clients want mature advice and attention. Technology is going to make the advisor more efficient in providing that.”

Another area that’s poised for transformation is the breakdown of an advisor’s client base. In the past, clients have been categorized by factors such as age and net worth, but that

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WHAT DO INVESTORS WANT FROM THEIR ADVISOR? Retirement planning

74% Ad-hoc and general advice

73% Estate planning (income tax and inheritance services)

67% Support when investing in new and specialized products

66% Education for long-term goals

57% Source: Wealth in the Digital Age, Accenture, 2017

WHAT TOOLS ARE INVESTORS LOOKING FOR? Statements and reporting

82% Detailed aggregate account summary

81% won’t necessarily be the case going forward.

“Incorporating technology into their practice will likely mean that advisors will shift from a traditional demographic segmentation of clients to more of a psychographic segmentation, where the onus will be on where each client fits on the ‘assisted’ to ‘unassisted’ service continuum,” D’Andrade says.

In the future, he envisions a new model for financial advice that’s determined more by a client’s willingness to embrace technology, level of interest in the day-to-day specifics of their investments and amount of communication desired, rather than their age or wealth level.

“There are people who have lots of money who don’t want as much attention,” he says, “and others who have less and need the attention. This is borne out by research that shows mature clients welcome technology and millennials want advice. It is perhaps why they hold higher cash positions than their parents, despite their much longer runway.”

Moving forward, D’Andrade sees two

Portfolio analysis and comparison with other products

71% Analysis of mutual fund performance

70% Portfolio risk indicators

68% Source: Wealth in the Digital Age, Accenture, 2017

significant trends that will drive the financial advice industry: longevity and exponential change. “Over the past 100 years, we are living 60% longer lives,” he says, “and this will have a massive effect on the nature of work, life and financial advice.”

In addition, while technology has accelerated change and brought more tools to advisors, it also has made it harder for them to plan too far into the future. The result is that financial planning designed around an end goal will also have to evolve.

“This means that financial advice will likely become less end-state biased and more iterative,” D’Andrade says. “This is due to a

greater uncertainty and a more episodic life experience, characterized by multiple pivot points. Living longer, less linear lives will force advisors to adopt technology in ways that allows them to manage each client’s ever-changing household balance sheets more effectively.”

Ultimately, D’Andrade says emphasis on financial planning – and its evolution – will need to become more of a cornerstone for advisors. “The principle will become more important,” he says. “Planning and process will become much more important than product. The new normal is that there is no normal.”

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SPONSORED PROMOTIONAL FEATURE

EXPERT ADVICE

The time of the season Horizons ETFs’ Seasonal Rotation ETF uses a seasonal rotation investment strategy to capitalize on trends throughout the year

SEASONAL INVESTMENT strategies trace their roots to commodity investing, but it wasn’t until the early 1990s that seasonal investing was applied to equities because there simply wasn’t enough data. Once the data became available, research analysts, such as Brooke Thackray of Horizons ETFs, started to create algorithms to find historical trends.

This concept is the basis of one of Horizons’ current offerings, the Horizons Seasonal Rotation ETF (HAC), which looks to capitalize on asset classes and

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sectors that have traditionally performed well during seasonally favourable times of the year. By entering and exiting those positions at relevant times throughout the year, the fund looks to provide investors with a different style of diversified, riskadjusted returns.

“What we are looking for are trends in either the broad market or sectors that have historically performed better than at other times of the year,” Thackray says. “We want to go back and ask, ‘Why did that happen at this

time of the year?’ When we see some sort of causation factor, we go and investigate it.”

Thackray says it’s a matter of looking at historical sector data in relation to the market itself. Horizons uses proprietary software that looks at a number of metrics to home in on specific dates each year.

“On average, over the long term, it identifies stocks that have performed well – or poorly – compared to the broad market,” he says. “Those dates come from a number of measurements run through different algorithms. We want something that is outperforming the market on average. That is the basic premise.”

In addition, Thackray says Horizons looks for areas that show high frequency to better identify why that sector is doing well so they can determine the best time to enter and exit the position.

While HAC invests in a number of asset classes, it is primarily invested in equities – although Thackray points out that the fund will move into fixed income when historical data supports shifting to bonds. “We don’t, for example, hold government bonds in March,” he says, “but during the summer months, they have historically done better, so it makes sense.

We are not in all asset classes all the time, but we do provide a level of diversification.”

HAC also occasionally has exposure to predominant commodities, such as gold and oil, and takes a currency position at certain points in the year. “We are generally fully hedged to the Canadian dollar, but sometimes the US dollar has periods that will outperform,” Thackray says. “We may be long the US dollar for part of the year or go the other way, long the Canadian dollar. It really is a multiasset fund, and while the returns are primarily from equities, we are getting the benefit of diversified returns from other sectors.”

In terms of the sectors themselves, Thackray says his team creates a map based on seasonal trends, then narrows it down to 10 to 15 sectors that they believe might be the trends of the season. Then they do a strength analysis to determine which sectors will perform the best

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and diversify the fund from there.

“Our first screen is for seasonal justification,” he says. “Then we look at the technical perspective to determine where the strongest momentum is. This helps in our timing decisions to enter and exit the sector or name.

Sometimes, if we see a sector picking up, we will enter early; other times, we will go in later or not at all. Every year the fund is different – it depends on what the internals of the market are doing at the time.”

HAC can also be rebalanced during the season, based on how a sector is performing relative to its trend. “If a sector is not living up to its performance, we will just exit the position, even if it’s in its seasonally favourable period,” Thackray says. “The fund is really adaptable because if we exit that position, we don’t need to put the cash anywhere; we just withdraw from the market and wait for the next seasonal opportunity and roll into that.”

Thackray feels that’s something that sets HAC apart from other funds in the Canadian ETF marketplace. “I don’t know of any other fund that has the same type of flexibility within its discipline,” he says. “With HAC’s strategy, we know that, at some point, we have to be out of a given sector. But if we are invested in that sector according to its seasonal period, we also have the flexibility to continue to hold the investment for a month or so if the market conditions are favourable.

Conversely, if the tide starts to turn, we have the ability to divest that exposure early.”

Thackray says seasonal investors have a saying that they’re never wrong for long.

While a contrarian might say that this means they’re never right for long either, Thackray doesn’t see it that way.

“If a sector of the market is in a strong bull market, we will capture it in pieces – while we are long for those three or four months when it traditionally does well, we may miss out if it maintains bull momentum and we exit,” he says. “That’s OK … we are trying to stack the deck in our favour and capture the sweet spot of when it does well. When you put that together, you are likely to be much better

HAC’S SEASONAL TARGETS

Summer

Fall

Winter

Spring

Utilities

S&P 500

S&P 500

S&P 500

Healthcare

S&P/TSX Composite

S&P/TSX Composite

S&P/TSX Composite

Energy

Information technology

Russell 2000

Energy

Bonds

Materials

Materials

Bonds

Consumer staples

Consumer discretionary

Consumer discretionary

Consumer staples

Gold

Retail

Financials

Oil E&S

Natural gas

Transportation

Metals and mining

Agriculture

Gold stocks Large-cap growth Homebuilders

“We want to go back and ask, ‘Why did that happen at this time of the year?’

When we see some sort of causation factor, we go and investigate it” Brooke Thackray, Horizons ETFs off because, over the long term, the seasonal period overcomes what is missed, and you get better risk-adjusted returns.”

For advisors, Thackray sees two main advantages of HAC. The first is its level of diversification. HAC is a multi-asset fund that provides a different return profile than a pure equity fund, along with strong risk-adjusted returns. The other benefit is that it’s easily understandable.

“End users want to know what’s in a fund.

It’s hard for advisors to sell a complex fund,” he says. “With HAC, investors know what drives it and what they are getting, so it’s easy to show why it has done well. They can actually understand this fund and are comfortable with it. In the last five years, it has returned 8.11%, as at July 31, 2019, and hasn’t had the same drawdowns as the S&P 500 or the TSX 60, which certainly helps.”

The views/opinions expressed herein may not necessarily be the views of Horizons ETFs Management (Canada) Inc. All comments, opinions and views expressed are of a general nature and should not be considered as advice to purchase or to sell mentioned securities. Before making any investment decision, please consult your investment advisor or advisors.

Certain statements may constitute a forward-looking statement, including those identified by the expression “expect” and similar expressions (including grammatical variations thereof). The forward-looking statements are not historical facts but reflect the author’s current expectations regarding future results or events. These forward-looking statements are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from current expectations. These and other factors should be considered carefully and readers should not place undue reliance on such forward looking statements. These forward-looking statements are made as of the date hereof and the authors do not undertake to update any forward-looking statement that is contained herein, whether as a result of new information, future events or otherwise, unless required by applicable law.

Commissions, management fees and expenses all may be associated with an investment in the Horizons Seasonal Rotation ETF managed by Horizons ETFs Management (Canada) Inc. (the “ETF””). The ETF is not guaranteed, its value changes frequently and past performance may not be repeated. The ETF may have exposure to leveraged investment techniques that magnify gains and losses and which may result in greater volatility in value and could be subject to aggressive investment risk and price volatility risk. Such risks are described in the prospectus. The prospectus contains important detailed information about the ETF. Please read the prospectus before investing. *The indicated rates of return are the historical annual compounded total returns including changes in per unit value and reinvestment of all dividends or distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. The rates of return shown in the table are not intended to reflect future values of the ETF the Index or returns on investment in the ETF the Index is not directly investable.

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23/08/2019 5:02:04 AM

PEOPLE

ADVISOR PROFILE

Emphasizing the human touch Kelly Hemmett doesn’t shy away from using the latest technology – but he does it while building personal, trusting relationships with his clients

A CAREER as a financial advisor wasn’t Kelly Hemmett’s original plan. Growing up, he had his sights set on becoming an architect and designing buildings – he certainly saw a lot of them as the son of an offshore drill worker, living in 20 different places around the world. Yet as the years went by, Hemmett realized he had a passion for understanding how money works and creating financial plans. As an advisor, he has taken that passion and applied it to his clients’ lives for nearly 30 years.

While pursuing environmental studies at the University of Winnipeg, Hemmett’s interest was piqued by his first exposure to economics. After graduating, he came across an ad in the paper for a position with Investors Group and decided to apply. “I was probably pretty fortunate to get an interview because I was only 23 years old and certainly not the poster child for a financial advisor,” Hemmett says.

However, once he was selected for the job, he hit the ground running. “A lot of time was spent on selling mutual funds,” he says.

“I connected with clients and anyone who would talk to me.”

Hemmett went on to spend more than 20 years with Investors Group. During that time, he earned his CFP, which took his

40

business to another level. He also he started to incorporate technology into his practice to help him focus on the decisions clients were making.

“Once we saw what some of the planning software could do, I really got interested,” he says. “We were able to look at different scenarios. It was great for people to pile up money, but this was a way to figure out what they needed to do to reach objectives.”

While Hemmett realized the benefits of technology, he was always cautious about its limits. He says that sometimes the plans generated were too complex, so it was his job to simplify things for his clients.

“Our process is very fluid,” he says. “We use the platform so clients can refer back to the plan, but it is not cookie-cutter. Changes can be made in order to represent the big picture.”

To realize when those changes need to be made, Hemmett and his team establish deep relationships with their clients, understanding every aspect of their lives, which allows them to pivot with clients’ life events when necessary.

“I love software, but I think we as financial planners need to be careful,” Hemmett says. “There is a lot of info out there, and if you rely too heavily on it, you lose the human touch, and that is a disservice to the client.

Good advisors are involved with their clients and talk about what’s going on in their lives.”

In 2013, Hemmett made the difficult decision to move from Investors Group to Harbourfront Wealth Management, which he considers one of his greatest challenges.

“I really wanted to be unbiased in our offerings,” he explains. “I felt I had gone

HEMMETT ON HIS FINANCIAL PLANNING APPROACH “I used to use a financial planning triangle. It has moved around, but the key is aligning clients’ parameters – risk profile, goals, timeline, money situation, revenue streams – and figuring out objectives, then putting it together to show what the outcomes will look like. To me, it’s about putting clients in a position to make informed decisions. It can be hard to make those decisions without the template, so building those templates is at the core of what we do.”

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FAST FACTS: KELLY HEMMETT

PRACTICE Hemmett Anseeuw & Associates

FIRM Harbourfront Wealth Management

LOCATION Winnipeg, MB

“We think we should be able to bring more to clients than what it costs them to work with us – that’s why it’s so important to be involved with their lives” as far as I could in one area and wanted to make changes. It was scary to make the change because it really got me out of my comfort zone, but it allowed us to get where we wanted. Looking back, I’m thankful I did it – it has allowed me to become more active and engaged, and now I feel we are just getting started.”

The engaging approach has made Hemmett and his partner, Kevin Anseeuw, and their team able to help clients in more ways than just wealth planning, including tax, insurance and estate planning.

“We think we should be able to bring

more to clients than what it costs them to work with us – that’s why it’s so important to be involved with their lives,” Hemmett says.

“It’s the full understanding of their situation and objectives that allows us to demonstrate our value.”

Hemmett’s team was recently recognized at the 2019 Wealth Professional Awards as Advisory Team of the Year (10 or More Staff ). “For us, [the award] was a validation of something we started a long time ago,” Hemmett says. “To start from humble beginnings and now have national recognition is pretty special.”

YEARS IN THE INDUSTRY 28

CERTIFICATIONS CFP, CIM

EDUCATION Bachelor’s degree in environmental studies, University of Winnipeg

AWARDS Advisory Team of the Year (10 Staff or More), 2019 Wealth Professional Awards

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23/08/2019 4:00:43 AM

SPECIAL PROMOTIONAL FEATURE

ETFs

High five With five ETFs that generate more than 5% in yield, BMO Global Asset Management is giving investors options for earning income

GIVEN THE uncertainty and volatility in today’s markets, the search for alternative sources of yield is crucial. With global interest rates near all-time lows, traditional forms of creating yield, such as fixed income, aren’t as reliable as they have been in the past. That’s why BMO is trying to educate advisors and investors on its five ETFs that generate more than 5% yield. While each ETF incorporates different strategies and exposures, these options can help investors earn income off their investments in a tax-efficient way.

BMO’s five over 5% includes the BMO Canadian High Dividend Covered Call ETF (ZWC), BMO Covered Call Canadian Banks ETF (ZWB), BMO Laddered Preferred Share Index ETF (ZPR), BMO US Preferred Share Index ETF (ZUP) and BMO International Dividend Hedged to CAD ETF (ZDH). At the end of May, these ETFs had distribution returns ranging from 5.04% to 6.87%.

“The idea behind the five for 5% ETFs was to let investors know about these ETFs – they all cost between 0.4% and 0.65%, but [their] main sources of return are income, dividends and call premium,” says Daniel Stanley, director at BMO Global Asset Management.

“If you look at the chart of the US 10-year Treasury bond yield, it has been going down for 30 years,” Stanley adds. “Rates continue to go down – they are at unbelievable lows, and the US Fed just cut their rate in July. Bloomberg data says there is now $13 trillion in government bonds globally that are trading at negative yields, so you’re not earning anything – you’re paying to own those bonds. Forget not

earning money – we are in a world where you’re starting to have to pay to have your money sit in a bank account. That’s why the search for alternative sources is so important.”

The key to the strong performance of these five ETFs can be attributed to the current uncertainty in the global markets. “When you have that uncertainty, investors tend to seek income as a dependable source of return from their investments,” Stanley explains. “The income generated from the ETFs, whether dividends or call premiums, acts as the floor to the value of the investment. People like to know there is a floor to the value of the investment in times of uncertainty.”

The five ETFs are all equities and have tax-efficient strategies, but they differ in how

they generate their distribution yield. ZDH is a pure international dividend play, ZWC and ZWB combine dividends and call-writing strategies to generate higher yield, while ZPR and ZUP are preferred-share ETFs – stock and bond hybrids. ZPR is a Canadian rate reset preferred-share ETF, and ZUP is a US preferred-share ETF. “Within the covered call ETFs, with ZWB being a Canadian bank ETF, we look at all of the bank stocks,” Stanley says. “For ZWC, we look at all the stocks in Canada and for companies that have grown their dividends over a three-year period. Then we write call options on roughly half of the portfolio. The net effect is that you earn dividends on half of the portfolio, and on the other half, with the covered call, you are earning the call premium.

It is very tax-efficient because the dividends get the Canadian Dividend Tax Credit, and the call premiums are taxed as capital gains.

“Covered call strategies, first and foremost, appeal to investors who want tax-efficient income,” he adds. “The important thing about call writing is when you have a call-writing program on stocks, you limit upside if they move up aggressively. The benefit is you collect a higher premium. It is designed for people who want tax-efficient income.”

YIELDS FOR BMO’S 5 OVER 5% BMO Canadian High Dividend Covered Call ETF (ZWC)

6.87% BMO Covered Call Canadian Banks ETF (ZWB)

5.49% BMO International Dividend Hedged to CAD ETF (ZDH)

5.14% BMO Laddered Preferred Share Index ETF (ZPR)

5.13% BMO US Preferred Share Index ETF (ZUP/ZUP.U)

5.04% Source: BMO, annual distribution yield as of May 31, 2019

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clients, including the potential to generate income in a low rate environment, tax efficiency and the intense screening process the companies in the ETFs go through.

“For people who are relying on income from their investments to cover expenditures, you need investments that generate yield,” he says. “Income tends to be a more stable source of return during times of economic stress in the market. Also, the screening process on these ETFs ensures you own a portfolio of quality companies. Finally, the tax efficiency because the Canadian dividend component gets the Canadian Dividend Tax Credit, and call premiums are taxed as capital gains.

Not only do you get premium distribution, but a tax-efficient source of income, so you get to keep more of the money you earn off the return.”

“We are in a world where you’re starting to have to pay to have your money sit in a bank account. That’s why the search for alternative sources is so important” Daniel Stanley, BMO Global Asset Management The preferred-share options are a bit different. ZPR owns a portfolio of Canadian rate reset preferred shares. Roughly 20% of the portfolio is in a five-year ladder, and the dividends earned are also eligible for the Canadian Dividend Tax Credit. As for the US preferred-share ETF (ZUP), BMO screens US preferred shares for liquidity, market capitalization and quality, and then includes the top dividend payers from that list.

“The preferred-share strategies appeal to someone who wants income but a product with a lower correlation to the broad markets – generally someone who is seeking diversifica-

tion in their investment portfolio,” Stanley says.

For ZDH, BMO screens international markets for companies that have a positive or flat three-year dividend growth rate to find the companies that have sustainable dividends.

“With ZDH, you are collecting a dividend,” Stanley says. “At the end of the day, you obtain the upside and downside of that stock portfolio. As a result, of the five, ZDH is probably the riskiest and would appeal to investors who have a greater risk tolerance and longer time horizon.”

Stanley sees a number of advantages in these higher-yield ETFs for an advisor’s

This article is for information purposes. The information contained herein is not, and should not be construed as, investment, tax or legal advice to any party. Investments should be evaluated relative to the individual’s investment objectives and professional advice should be obtained with respect to any circumstance.

The payment of distributions is not guaranteed and my fluctuate. The payment of distributions should not be confused with a fund’s performance, rate of return, or yield. If distributions paid by the fund are greater than the performance of the fund, your original investment will shrink. Distributions paid as a result of capital gains realized by a fund, and income and dividends earned by a fund are taxable in your hands in the year they are paid. Your adjusted cost base will be reduced by the amount of any returns of capital. If your adjusted cost base goes below zero, you will have to pay capital gains tax on the amount below zero.

Please refer to the fund’s distribution policy in the prospectus. Any statement that necessarily depends on future events may be a forward-looking statement.

Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. Although such statements are based on assumptions that are believed to be reasonable, there can be no assurance that actual results will not differ materially from expectations. Investors are cautioned not to rely unduly on any forward-looking statements. In connection with any forward-looking statements, investors should carefully consider the areas of risk described in the most recent simplified prospectus.

Commissions, management fees and expenses (if applicable) all may be associated with investments in mutual funds and ETFs. Trailing commissions may be associated with investments in certain series of securities of mutual funds.

Please read the ETF facts, fund facts or prospectus of the relevant mutual fund or ETF before investing. The indicated rates of return are the historical annual compounded total returns including changes in share or unit value and reinvestment of all dividends or distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. Mutual funds and ETFs are not guaranteed, their values change frequently and past performance may not be repeated.

For a summary of the risks of an investment in the BMO ETFs, please see the specific risks set out in the prospectus. BMO ETFs and ETF series trade like stocks, fluctuate in market value and may trade at a discount to their net asset value, which may increase the risk of loss. Distributions are not guaranteed and are subject to change and/or elimination.

BMO ETFs are managed by BMO Asset Management Inc., which is an investment fund manager and a portfolio manager, and a separate legal entity from Bank of Montreal. ®/™Registered trade-marks/trade-mark of Bank of Montreal, used under licence.

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23/08/2019 5:02:29 AM

SPECIAL PROMOTIONAL FEATURE

REITs

Global opportunities Middlefield Group’s Dean Orrico explains why the firm’s REIT INDEXPLUS ETF gives investors global real estate diversification that they won’t find elsewhere

IDR’S ALLOCATIONS Sector allocation Real estate 98.4% Debt 1.6%

Geographic allocation Canada 71.2% US 19.6% Rest of the world 9.2% Source: Middlefield Group

EARLIER THIS year, Middlefield Group converted its REIT INDEXPLUS fund to an ETF, which trades on the TSX under the ticker symbol IDR. While the fund has had a strong track record for more than eight years, converting it to an ETF was a way to give investors low-cost, liquid exposure to real estate investments, not just in Canada, but globally. IDR is unique in that it employs Middlefield’s proven ‘index-plus’ strategy, where a portion of the fund tracks the

lower their risk and enhance returns, Orrico adds. While he notes that IDR invests in real estate outside of Canada, it’s not an indication that Middlefield is opposed to Canadian REITs. “We really like a number of Canadian REITs, but if you can supplement that with global diversification, you get exposure to different sectors that you can’t get in the Canadian market,” he says.

IDR’s hybrid strategy, which combines index-tracking with active management, has

“This strategy … allows us to add more exposure in sectors that we like – for example, industrial real estate” Dean Orrico, Middlefield Group Canadian REIT index, and the balance is actively managed to provide greater exposure to global real estate issuers.

“Global exposure is important for a variety of reasons,” says Middlefield Group president and CEO Dean Orrico. “There are a number of economies around the world that may be doing better or worse than the overall global economy. For example, today, the US economy is doing better than almost any other in the developed world. That means there are opportunities there, and you just can’t leave those opportunities on the table.”

Adding this diversification helps investors

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been effective for Middlefield in several of its funds. It allows the firm to customize the weighting of certain companies within the Canadian REIT index or add other real estate companies from anywhere in the world.

“The Canadian REIT index is concentrated among 19 names,” Orrico explains. “In our view, that may result in weightings that we don’t think are prudent. That’s where our active management comes in. We can reduce the weighting of a company within the index or, if we see a small weighting in an index constituent that we like, we can increase it.

Further, for a company not in the index, we

can add it. Another benefit of this strategy is that it allows us to add more exposure in sectors that we like – for example, industrial real estate. Since the Canadian REIT index is underrepresented in industrial real estate, we can add to this sector within the active portfolio of the fund.”

Middlefield believes industrial real estate is a good way to get exposure to the early stages of growth in e-commerce, which relies on large industrial buildings to provide warehousing, logistics and distribution services.

Data centres and cell towers also provide opportunities in relation to e-commerce, Orrico adds.

“Warehouses that host companies and rent data storage is something that you can’t find in Canada on a pure-play basis,” he says. “Cell tower businesses are another. With the growth of the Internet of Things and as companies look to deploy their own 5G networks, they will host them on those towers.”

Orrico views REITs as the single best source of steady, growing and tax-efficient income, which is why he believes advisors should be incorporating them in portfolios.

“This type of fund appeals to any individual investor, whether they need income or are focused on total returns,” he says. “Some may say just retirees should buy REITs, but I argue that everyone should. Companies like REITs that pay steady and growing dividends over the long term have proven to generate the best total returns.”

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FEATURES

RELATIONSHIP-BUILDING

The secret to building client rapport Engaging with clients effectively is an essential part of an advisor’s daily life, but it isn’t always easy. Business storytelling specialist Mike Adams explains how advisors can build better rapport

HAVE YOU ever wondered how some people seem to effortlessly reach their sales targets?

How they have a steady flow of easy, friendly business? These salespeople make the most money, are the most valuable employees and love their jobs to boot.

The truth is that rapport-building is the hidden skill of the best salespeople. Their clients keep coming back for more business and go out of their way to refer them to friends and colleagues – and those recurring clients are many times more valuable to them than

single-transaction clients.

Ben Feldman was a high-school dropout who became possibly the greatest salesman in post-World War II America. In a career spanning 50 years, Feldman wrote more than $1.5 billion in life insurance policies.

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FEATURES

RELATIONSHIP-BUILDING

A HIERARCHY OF SALES SKILLS Sales skills are often presented as a hierarchy because skills at the base are required for mastery of skills above, as illustrated below.

Negotiation

Making authentic connections

Presentation

Proposal

Conversation skills Conversation skills enable the entire sales process The basic objective of a customer conversation is to uncover and quantify the plans, challenges and aspirations of the customer. It is this customer understanding that forms the basis of any proposal or sales presentation, negotiation or pricing strategy.

Source: Thestoryleader.com

Still working in his 80s, Feldman suffered a cerebral edema in 1992. While he was critically ill in the hospital, his employer, New York Life, decided to create a sales competition in his honour called Feldman February. The inaugural winner of Feldman February was …

Ben Feldman! He closed $15 million worth of insurance from his hospital bed.

Was Feldman making cold calls from his hospital bed? Of course not. He was calling friends – the legion of clients he’d established a lasting rapport with over a lifetime.

The power of the personal The importance of building a rapport by exchanging personal stories is often not well understood. Mike Bosworth, author of the classic sales textbook Solution Selling, told me that for most of his 30 years as a sales trainer, the conventional wisdom was that rapportbuilding could not be taught. He changed his

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won out. Furthermore, I would have returned to a technical role if I hadn’t closed the luckiest deal in history in my first year.

It’s these surprising turning points that make your career backstory interesting and encourage your future client to respond with an open story of their own.

mind on this topic only late in his career.

The secret is to tell a story about how and why you do what you do, within the space of a couple of minutes. If you include personal events and you’re honest about the setbacks and vulnerabilities of your career, all the better. Because ultimately the purpose is to get into a position to say, “Well, enough about me!

What about you? How did you get to do what you do?” And that question passes the baton.

If you’ve been open, honest and vulnerable in telling your story, you’re more likely to receive an open story in response. This story exchange initiates rapport.

To give an example: I trained as an electrical engineer, and in the mid-’90s I was working as a rock physicist in England when I was offered a corporate role selling software in Norway. My wife was eight months pregnant, and I didn’t want to be a salesperson, but the lure of Norway and our spirit of adventure

By now you might have some questions, such as: Is it really worth putting this much effort into a personal story? And isn’t the whole process manipulative?

Yes, it is worth the effort, because it will become the foundation of every effective business connection you make. And in a sense it is manipulative. We’re presenting a view of ourselves that we’ve spent time crafting. We’re not telling the full story. That’s not possible, and we’re not dwelling on things that would undermine our authority.

But the interesting thing is that these stories are like lie detectors. When we tell a story about something that happened to us, we relive those moments, and the emotion of those events comes out in our voice. If we’re telling a true story, the tone of voice is authentic. If it’s not true, that is also detectable.

If you think about your close friends, they know your story, and you know their story.

We select moments that actually happened in our lives and deliver them authentically as a way to connect. The listener re-creates and co-experiences the events of our story with us and becomes connected to us. It’s the first step to friendship. If you want to develop deep, long-term business relationships, learn how to exchange personal stories.

Mike Adams is a business storytelling specialist and author of Seven Stories Every Salesperson Must Tell. Since 2014, his storytelling consulting practice has been helping sales teams find and tell their best stories. Find out more at thestoryleader.com.

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PEOPLE

CAREER PATH

MULTI-DISCIPLINARIAN Christine Van Cauwenberghe has always seen the value of bridging various disciplines with the goal of putting the client first

Commerce and law diplomas in hand, Van Cauwenberghe was bought on board at Thompson, Dorfman, Sweatman.

“It was monumental for me to join a prestigious firm doing such interesting work. We were expected to bring in our own clients – I had no idea how. I realized I needed to network and started working with financial planners.”

1994

STARTS IN LAW

2001

2002 SPEAKS OUT Early in her career with IG, Van Cauwenberghe became a media spokesperson when she recognized the immense demand for financial information in Canada.

“Financial planners are seen as general practitioners that clients talk to about all the things happening in their lives, and they are expected to know the answers to all sides. It really highlighted for me how much hunger there was for information amongst both consumers and advisors.”

2007 STEPS UP After doing several media interviews with the executive director of STEP Canada, the body that oversees the Trust and Estate Practitioner designation, Van Cauwenberghe was asked to help build the organization’s educational program.

“STEP was emerging as the professional organization of choice for those in private-client markets. It was multi-disciplinary: lawyers, accountants and financial planners all advancing knowledge in their areas of expertise. The launch of the diploma program was my proudest achievement.”

2018 BRINGS DISCIPLINES TOGETHER As the current vice-president of tax and estate planning at IG, Van Cauwenberghe oversees another internal working group targeted toward high-net-worth clients.

“I wanted to participate in a process whereby every high-net-worth client would have access to all different advisors right away. We do an analysis on the front end and identify areas of concern; it’s been a great experience.”

JOINS THE TEAM Van Cauwenberghe got her introduction to the wealth management world through a job at Investors Group, where she worked on a multi-disciplinary team of lawyers, financial planners and accountants.

“It was pivotal … I saw the power of those disciplines in collaboration. It was an excellent way to ensure we were providing clients with holistic advice” 2006

WRITES A BOOK Having attained her financial planning designation, Van Cauwenberghe turned her attention to filling the void of helpful information for financial planners.

“I was often asked to recommend books appropriate for financial planners, so I started reading all of them to see which ones I could recommend, and nothing was really geared towards financial planners. As a result of that desperation, I ended up writing one. I took a client-centric approach.”

2008

DEVELOPS AN INTERNAL COMMITTEE Van Cauwenberghe broke new ground when she created an internal committee at IG that aims to prevent powers of attorney being used as a tool to facilitate financial abuse of seniors and vulnerable people.

“I started seeing a number of people using powers of attorney to attempt to gain access to their parents’ accounts and a fair bit of financial abuse, and I realized we needed to develop policies we could enforce on a consistent basis.”

www.wealthprofessional.ca

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PEOPLE

OTHER LIFE

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

“I was onstage almost entirely for the first act [of Inherit the Wind],” Moir says, “then took a good nap every night during the second half!”

30

Plays and musicals Moir has participated in

6

Number of costume changes Moir did during Lost in Yonkers

3

Evenings each week Moir spends in rehearsal

THE WORLD’S A STAGE When he’s not helping investors, Sean Moir can most often be found in the spotlight SEAN MOIR first trod the boards at age 7 as Charlie Brown – “and I liked it so much that I convinced my parents to put me in theatre school for the summer,” he says.

After that, Moir took to the stage with a passion that eventually led to him nabbing the lead in Lost in Yonkers at age 14 – a role

48

that required him to be onstage for the entire two-hour play.

These days, Moir balances his work as a portfolio manager at Mandeville Private Client by acting in two or three productions a year, most recently landing the “juicy role” of the preacher in Inherit The Wind, where

he savoured “playing up the fire and brimstone” aspects of the character.

It makes for a demanding schedule – but Moir finds it energizing. “I do numbers during the day and theatre at night, and the two activities use different parts of the brain.

That second life is very refreshing. “

www.wealthprofessional.ca

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