Wealth Professional Canada 9.07 by Key Media

WWW.WEALTHPROFESSIONAL.CA ISSUE 9.07 | $12.95

THE NEXT BIG THING IN ETFs Which of this year’s groundbreaking funds are worth a closer look? 5-STAR ASSET MANAGERS

Advisors reveal the fund providers they love to work with

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LESSONS FROM TOP PORTFOLIO MANAGERS

How eight of Canada’s best PMs are tackling the challenges of income, inflation and more

5-STAR WEALTH TECH PROVIDERS

These 26 companies are delivering the tech tools advisors can’t live without

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One-Click Diversification Portfolio ETFs that Work for You

HGRO

HORIZONS GROWTH TRI ETF PORTFOLIO

HBAL

HORIZONS BALANCED TRI ETF PORTFOLIO

HCON

HORIZONS CONSERVATIVE TRI ETF PORTFOLIO

Commissions, management fees and expenses all may be associated with an investment in exchange traded products managed by Horizons ETFs Management (Canada) Inc. (the “Horizons Exchange Traded Products”). The Horizons Exchange Traded Products are not guaranteed, their value changes frequently and past performance may not be repeated. The prospectus contains important detailed information about the ETF. Please read the relevant prospectus before investing.

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ISSUE 9.07

CONNECT WITH US

CONTENTS

Got a story or suggestion, or just want to find out some more information? @WealthProCA facebook.com/WealthProCA

UPFRONT 02 Editorial

SPECIAL REPORT

5-STAR WEALTH TECH PROVIDERS

Technology is an integral part of advisors’ daily lives – so which tech companies are offering the best platforms in the business?

Wealth Professional examines eight of the year’s biggest ETF trends, from cryptocurrency to clean energy

PEOPLE

INDUSTRY ICON

Launching an industryleading independent wealth management firm was so nice that Wellington-Altus founder Charlie Spiring did it twice

04 Statistics

Key data that should be on your radar this month

06 News analysis

The CFRs prompt a product shift from the banks

08 Intelligence

This month’s big movers, shakers and new products

10 ETF update

Why now’s the right time to invest in Canadian banks

12 Alternative investment update A new online platform offers easy access to real estate investing

14 Opinion

Reports of the tech sector’s decline have been greatly exaggerated

FEATURES

THE NEXT BIG THING IN ETFs

An uncertain environment makes advisors more crucial than ever

FEATURES

LEADING PORTFOLIO MANAGERS

Eight of Canada’s top PMs share their strategies for everything from managing pandemic anxiety to getting ahead of inflation

PEOPLE 70 Curiosity pays off

Advisor Kate Murdoch’s drive to ask questions has served her well as she’s built her practice

80 Other life

Taking the field with advisor and pro football player Adam Bighill

SPECIAL REPORT

5-STAR ASSET MANAGERS

Advisors name the asset managers that are excelling at meeting their clients’ investment needs

WEALTHPROFESSIONAL.CA CHECK IT OUT ONLINE www.wealthprofessional.ca

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UPFRONT

EDITORIAL wealthprofessional.ca ISSUE 9.07

A time for advisors to shine

he past year and a half has brought a period of unprecedented change, and the tide of disruption won’t be ebbing anytime soon. With the arrival of 2021, the world had hoped to find some form of stability from the upheaval caused by COVID-19. But three quarters in, uncertainty is still hanging thick in the air. Before the vaccines’ promise of protection could be fulfilled, new variants of the virus emerged, throwing regions and entire countries into third and even fourth waves of lockdowns. Fuelled by supply shocks and resurgent demand, inflation is rearing its ugly head, leaving policymakers with the unenviable task of trying to find a balance between economic growth and stability.

There’s no denying that advisors have a higher-than-ever bar to clear when it comes to acting in their clients’ interests At the micro level, the financial industry is adapting to other changes. The work-from-anywhere model has ascended from being a tactical to a strategic priority, and an increasing number of firms have made it a key element of their flexible work plans. Ensuring safety and security will surely become more challenging; aside from implementing health measures at physical locations, the need to safeguard clients’ financial information is taking on even greater importance. There’s no denying that advisors have a higher-than-ever bar to clear when it comes to acting in their clients’ interests. An emphatic case in point is the Client Focused Reforms being enacted by the CSA, set to take full effect by the end of the year. The growing case for alternatives exposure and jagged price moves in meme stocks and other exotic assets have made questions of investor risk tolerance and suitability more crucial. The same goes for the protection for seniors and other vulnerable investors – financial professionals are expected to make all reasonable efforts to ensure clients name a TCP and use their best judgment to apply temporary holds in cases where they suspect financial exploitation. One thing’s for certain: Given the near- to medium-term outlook of uncertainty, it’s more important than ever for advisors to be agile, adaptive and responsive to their clients’ needs. If ever there were a time for wealth professionals to be there for investors, allaying their fears as they forge a path to a secure financial future, this is it. The team at Wealth Professional

EDITORIAL Managing Editor James Burton Editor Leo Almazora Writers Noelle Boughton Chris Davies Jonathan Russell

SALES & MARKETING Vice President, Media and Client Strategy Dane Taylor National Account Managers Alan Stewart Catherine Reale Business Development Manager Cori Canuel

Executive Editor Ryan Smith

Vice President, Sales John Mackenzie

Copy Editor Clare Alexander

Project Coordinator Jessica Duce

CONTRIBUTORS Jesse Gamble Michelle Gibbings

ART & PRODUCTION Designer Marla Morelos Production Manager Alicia Chin Production Coordinators Loiza Razon Kat Guzman Client Success Coordinator Michelle San Juan

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

james.burton@keymedia.com

SUBSCRIPTION INQUIRIES

tel: 416 644 8740 • fax: 416 203 8940 subscriptions@kmimedia.ca

ADVERTISING INQUIRIES dane.taylor@keymedia.com

Key Media Canada (Wealth) Ltd. 317 Adelaide Street West, Suite 910 Toronto, ON M5V 1P9 tel: +1 416 644 8740 www.keymedia.com Toronto • Denver • London • Sydney • Auckland • Manila • Singapore

Wealth Professional is part of an international family of B2B publications, websites and events for the finance and insurance industries LIFE HEALTH PROFESSIONAL james.burton@keymedia.com T +1 416 644 874O

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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

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Excellence in ETF investing and sustainability expertise. That’s a potent combination. Learn more from Franklin Templeton at franklintempleton.ca/newera

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UPFRONT

STATISTICS CANADIANS’ FINANCIAL CONFIDENCE RISES

A HOUSING MARKET OF CARDS? Canada’s housing market is highly vulnerable to a potential downturn, according to the latest assessment by the Canada Mortgage and Housing Corporation. The organization raised its risk rating for the overall market from moderate to high in late September, citing “problematic conditions in several local housing markets across Ontario and Eastern Canada,” although risk ratings for much of Western Canada remained at low or moderate levels. CMHC noted that the ongoing rise in home prices in certain areas is beyond what’s warranted by improving economic fundamentals.

42%

of Canadians say they feel more financially secure than they did a year ago

REGINA

Mar 2021

Sep 2021

Low

SASKATOON

Mar 2021

Sep 2021

Low

EDMONTON

Mar 2021

Sep 2021

Moderate

VANCOUVER

Mar 2021

Sep 2021

Moderate

Low

68%

VICTORIA

say they have enough money to get through an unexpected emergency

Mar 2021

Sep 2021

Moderate

CALGARY

67%

of Canadians say they continue to set financial goals

Mar 2021

Sep 2021

Moderate

URANIUM FUTURES RUN HOT The uranium spot market got a jolt last month when prices for uranium futures hit a six-year high of US$50.80 per pound. While the radioactive metal has been benefiting from some strong fundamentals, the recent price bump was attributed to the Sprott Physical Uranium Trust, which launched in July and has bought 24 million pounds of physical uranium as of September 10.

URANIUM FUTURES PRICE PER POUND $55 $50.80

$50

$48.55

of those with financial goals believe they’re on track to achieve them

$44.90 $40.40

$40.05

$40 $37.20

$35

$42.40

$40.25 $38.70

$34.60

$33.75 $33.55

$30 Source: Real Financial Progress Index, BMO

$48.05 $49.40

$44.15

$45

75%

$49.65

$49.75 $49.90

$35.65 $33.80

8/26/21 8/27/21 8/30/21 8/31/21 9/1/21 9/2/21 9/3/21 9/7/21 9/8/21 9/9/21 9/10/21 9/13/21 9/14/21 9/15/21 9/16/21 9/17/21 9/20/21 9/21/21 9/22/21 9/23/21 Source: Investing.com; all figures in US$

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EQUITY ETFs SHOW STRENGTH

CMHC’S MARKET VULNERABILITY RATING

In August, equity ETFs recorded some of their strongest monthly inflows for the year, taking in nearly $3.5 billion. Market-cap-weighted passive ETFs alone gathered $2.9 billion, while Canadian equity ETFs also remained popular.

ETF INFLOWS IN CANADA, AUGUST 2021

QUEBEC CITY

Mar 2021

Sep 2021

Low

$151 million Other

WINNIPEG

Mar 2021

Sep 2021

Low

$133 million

$580 million International equity ETFs

$296 million Sector ETFs

Factor ETFs

MONCTON

OTTAWA

Mar 2021

Sep 2021

High

Mar 2021

Sep 2021

High

$947 million

$2.91 billion

US equity ETFs

Cap-weighted ETFs

$1.99 billion Canadian equity ETFs

TORONTO

Mar 2021

Sep 2021

High

HALIFAX

HAMILTON

Mar 2021

Sep 2021

High

MONTREAL

Mar 2021

Sep 2021

Mar 2021

Sep 2021

High

Moderate

High Source: National Bank of Canada, Bloomberg

Source: Housing Market Assessment, Q2 2021

IS INFLATION STICKING? Inflation in Canada spiked to 4.1% year-over-year in August, closing in on the record of 4.2% set in March 2003. After five straight months of readings well above its 2% target, the Bank of Canada’s view that high inflation is temporary continues to be challenged.

TWELVE-MONTH CHANGE IN THE CONSUMER PRICE INDEX 5%

THE BITCOIN ROLLER COASTER Bitcoin prices soared past US$50,000 in the first week of September after El Salvador adopted the cryptocurrency as legal tender. But when China declared all cryptocurrency-related business activities illegal later in the month, Bitcoin sank below US$45,000. $60,000

$52,740 3% $50,000 2%

$47,124 $45,140

8/2020 9/2020 10/2020 11/2020 12/2020 1/2021 2/2021 3/2021 4/2021 5/2021 6/2021 7/2021 8/2021 Source: Statistics Canada, September 2021

$40,000

$42,933 $42,247 Source: YCharts.com; all figures in US$

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UPFRONT

NEWS ANALYSIS

A blow to competition? In the face of new KYP requirements, three of Canada’s largest banks are paring back their product shelves to include only in-house offerings, prompting questions about the impact on investors

THREE OF Canada’s Big Six banks – CIBC, RBC and TD – are in the spotlight following news that they’re restricting the product shelves at their branch advice businesses to in-house investment products only. The three banks made the changes in response to new know-your-product provisions under the Client Focused Reforms (CFRs) handed down by the CSA last year. According to public reports and emailed statements obtained by Wealth Professional, the banks justified the move by saying it would allow their advisors to “deliver more focused advice” and enable the companies to “streamline and enrich [their] offerings” to meet both client needs and regulatory requirements.

clients, despite their public statements about always putting their clients first.” According to RBC and CIBC (WP was unable to get a response from TD), thirdparty funds represent a small percentage of their business anyway. For instance, at RBC subsidiary Royal Mutual Funds Inc. (RMFI), only 2% of clients are invested in third-party funds – a figure that has steadily declined since 2017. But Jason Pereira, senior financial planner and portfolio manager at Toronto-based Woodgate Financial, argues that the banks themselves precipitated that decline by imposing sales quotas on their advisors to push proprietary products. While that prac-

“If all of the Big Five banks [go proprietary], the number of people potentially impacted is enormous” Jason Pereira, Woodgate Financial In consultations leading up to the CFRs, some observers warned that firms were likely to shrink their product shelves to save on compliance costs. But the news was still surprising to Jean-Paul Bureaud, executive director of investor rights group FAIR Canada. “They could have trained their advisors to better serve their clients,” Bureaud says. “Rather, they chose to limit choice for their

tice stopped after a public exposé, Pereira says bank employees are still facing internal pressures to sell. “If a small independent dealer went proprietary, the number of people impacted would be minimal,” he says. “If it’s all of the Big Five banks, the number of people potentially impacted is enormous.” Having a proprietary-only shelf of options

also reduces clients’ chances of getting the best recommendation. Ian Tam, director of investment research for Canada at Morningstar, did an analysis to estimate the breadth of selection banks offer in certain fund categories. “Among Morningstar-rated funds with commission-based share classes from those three banks, there are 563 funds in the US equities category, but only 27 share classes of North American equity funds,” Tam says. He also looked at those funds’ Morningstar star ratings, which score funds based on their historical risk-adjusted returns. Out of 810 funds from the three banks, 43% got three stars out of a possible five, but three-star funds make up only 35% of all the Canada-domiciled funds covered by Morningstar. “I would argue that an advisor who wants to make a recommendation in their client’s best interest would seek funds with better riskadjusted returns than their peers,” Tam says. According to the banks, retail clients will still have some access to external fund options.

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WHAT THE NEW KYP RULES SAY Under the know-your-product provisions of the CFR rule changes, the CSA stipulated that registered firms must take reasonable steps to ensure that the securities they make available to clients meet three criteria. Securities must be assessed with regard to their relevant aspects, including for structure, features, risks, initial and ongoing costs, and the impact of those costs They must be approved to be made available to clients Securities must be monitored for significant changes The rules also require registered individuals to take reasonable steps to sufficiently understand the securities they purchase, sell or recommend to a client, including the impact of the initial and ongoing costs associated with acquiring and holding each security. For example, third-party investment products held by CIBC clients before June 30 are unaffected. RMFI, meanwhile, will discontinue the purchase of individual third-party funds as of December 31 this year, after which

which will “invest in a curated selection of third-party funds.” Aside from that, clients can invest in new third-party products through the banks’ selfdirected brokerages, CIBC Investors Edge

“They could have trained their advisors to better serve their clients. Rather, they chose to limit choice for their clients” Jean-Paul Bureaud, FAIR Canada clients can continue to transfer in and hold third-party funds. Certain bank products will also provide access to outside firms’ capabilities. CIBC says its shelf includes investment options managed by “a breadth of third-party investment firms that feature diversification and competitive returns.” In January, RMFI plans to launch a new line of RBC Global Choices Portfolios,

and RBC Direct Investing, as well as through advisors at their full-service brokerages: CIBC Wood Gundy, RBC Dominion Securities and PH&N Investment Counsel. Still, Pereira questions the rationale behind that choice architecture. “The company can allow for advisors to do due diligence at the full-service brokerage level, but not other levels of distribution. Does that make sense?”

Other elements of the CFRs could help curb the issues surrounding proprietary-only product shelves. Firms with in-house investment products are supposed to conduct due diligence on comparable non-proprietary products available in the market to ensure their proprietary offerings are competitive. Another provision stipulates that conflicts of interest should be resolved in the client’s favour. Still, a lot will depend on how firms implement the rules. At the end of the day, Bureaud argues that the banks’ move reflects a fundamental problem: Even though firms say their priority is to provide sound financial advice, Canada’s investment industry is mainly regulated based on products. “Most individuals registered under securities law do not give financial advice,” he says. “If they give any advice, it’s usually advice on one type of product, and the advice is aimed at selling you that product – it’s transactional, not about financial advice at all.”

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UPFRONT

INTELLIGENCE CORPORATE ACQUIRER

TARGET

PRODUCTS COMMENTS

CI Financial

Portola Partners

In snapping up Portola, CI will increase its US wealth management assets to approximately $103 billion

Focus Financial

Cardinal Point Capital Management

The deal represents Focus Financial’s fifth Canadian wealth management platform acquisition

Mogo

Fortification Capital

Mogo’s acquisition of the broker-dealer represents an important step in its plans to develop a commission-free stock-trading solution

Ontario Teachers’ Pension Plan Board

HomeQ Corporation

OTPP’s purchase of HomeQ Corporation, the parent company of reverse mortgage issuer HomeEquity Bank, is expected to close in the first half of 2022

PARTNER ONE

PARTNER TWO

COMMENTS

Canaccord Genuity

International Deal Gateway

Canaccord Genuity’s strategic investment in the peer-to-peer investment platform will expand its distribution channels and help growing companies access new sources of capital

Raymond James

FactSet

The partnership will give the 900-plus Raymond James advisors in Canada access to FactSet’s web-based Wealth Workstation

Sun Life Canada

Conquest Planning

All of Sun Life’s retail clients, including group retirement plan members, will be able to take advantage of Conquest’s digital financial planning tool

OWL Analytics

Wealthscope’s partnership with the US-based ESG data research specialist will boost its investment analytics capability

Wealthscope

CI enters US ultra-high-net-worth space

As part of its ongoing US growth strategy, CI Financial has announced a deal to acquire registered investment advisor Portola Partners. Managing US$5.2 billion in assets, the Silicon Valley-based firm offers comprehensive investment and wealth planning solutions for ultra-high-net-worth families with complex, unique requirements. Its clientele includes tech company founders, executives and venture capitalists. “Portola’s expertise and client focus have earned them the loyalty and trust of some the country’s most successful wealth creators, and we are thrilled to have the team join CI,” said CI CEO Kurt MacAlpine. “Portola has developed wide-ranging capabilities to address the multifaceted needs of ultra-highnet-worth families, from intellectually rigorous, endowment-style investment management to complex tax planning to a wide range of family office services.”

Gluskin Sheff launches new fund for charitable giving

Gluskin Sheff has launched the Gluskin Sheff Foundation for Philanthropy (GSFFP) to provide a donor-advised fund that allows Canadian investors to consolidate their charitable giving in one place. A registered charity under the Income Tax Act, the GSFFP provides a charitable tax receipt for the value of donors’ gifts. According to Tiffany Harding, vicepresident and head of wealth planning at Gluskin Sheff, “donor-advised funds offer an attractive alternative to the administrative burden, cost and time involved in establishing and managing a private family foundation.”

Morningstar introduces due diligence module

Morningstar has launched a new module designed to help advisors comply with know-yourproduct obligations under Canada’s new Client Focused Reforms. The Morningstar Due Diligence Module offers the ability to filter a firm’s approved product shelf down to a reasonable range of options, helping advisors select suitable investment recommendations based on performance, risk and fee data, as well as Morningstar’s proprietary ratings. The module helps establish a firm-wide investment selection process, with a built-in audit trail to help advisors show that they’ve addressed suitability requirements.

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PEOPLE New Fidelity funds take on disruption, inflation

Fidelity Investments Canada has launched three new funds to help investors access thematic opportunities and mitigate the risks of inflation. The Fidelity Disruptors Class invests primarily in equities from global companies involved in five potentially disruptive themes: automation, communications, finance, medicine and technology. The Fidelity Disruptive Automation Class primarily invests in companies that have the potential to disrupt the field of automation. Finally, the Fidelity Inflation-Focused Fund seeks to mitigate the negative effects of inflation and take advantage of positive outcomes that can arise during an inflationary cycle.

FGP rolls out small- and mid-cap global fund

Foyston, Gordon & Payne (FGP) has launched the FGP Global Smaller Companies Fund, which seeks long-term capital appreciation through exposure to global small- and mid-cap equities. The fund is driven by the quality and value investment philosophy that FGP has built its reputation on for more than 40 years. “We can better pick our spots among smaller companies,” said Ray Szutu, the fund’s lead portfolio manager. “Stocks in this space are generally less followed by the broader investment community, which offers an attractive environment for fundamental, bottom-up investors like us.”

Appway offers Canadaspecific onboarding solution

Appway has made its Client Onboarding for Wealth solution available to Canadian wealth management firms. Engineered to comply with both provincial and federal rules, the cloud-based solution is highly configurable to fit new and existing workflows. It’s able to integrate with legacy systems and a broad ecosystem of third-party service providers, and has the agility to react to changing compliance and business requirements. “Our new offering empowers forward-thinking firms looking to enable their advisors to enrich customer satisfaction by leveraging this market-leading solution,” said Harold Reimer, sales director for Appway Canada.

NAME

LEAVING

JOINING

NEW POSITION

Alanna Boyd

N/A

Sun Life Financial

Chief sustainability officer

Carlos Desierto

Manulife Investment Management

PenderFund Capital Management

President

Christian Perreault

N/A

Wellington-Altus Private Wealth

Senior vice-president and regional manager, Quebec

Francesca Shaw

N/A

Canaccord Genuity

Non-executive independent director

Joanna Rotenberg

BMO Financial Group

Fidelity Investments

Head of personal investing

Michael Wissell

N/A

Healthcare of Ontario Pension Plan

Chief investment officer

Nadine Ahn

N/A

RBC

Chief financial officer

Natalie Bisset

BMO

Richardson Wealth

Senior vice-president and head of corporate development

Rick Headrick

N/A

Investment Funds Institute of Canada

Board chair

Pender welcomes new president

PenderFund Capital Management has named Carlos Desierto as its new president. A 20-year industry veteran, Desierto was most recently at Manulife, where he played a leading role in the global expansion of the organization’s private markets franchise. Prior to that, he oversaw the investment strategy supporting Manulife’s insurance products, focusing on long-duration alternative assets such as real estate, infrastructure, private equity and private credit. “Our plans are centred around accelerating our growth in private equity and institutional asset management, and Carlo will be leading the strategy in these mission-critical areas,” said Pender CEO David Barr.

Sun Life names first sustainability head

Sun Life has appointed Alanna Boyd as its first-ever chief sustainability officer. Since joining Sun Life in 2016, Boyd has been a leader in developing and advancing the company’s sustainability strategy, including directing its Purpose-led Sustainability Plan in 2019. She’s also been vital in furthering Sun Life’s ESG disclosures in response to investor interest and growing demand for robust corporate transparency on sustainability efforts. “Alanna brings a depth of sustainability experience and expertise to help Sun Life continue to embed sustainable practices across our business operations,” said Sun Life president and CEO Kevin Strain.

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UPFRONT

ETF UPDATE NEWS BRIEFS New Horizons ETFs offer levered REIT exposure

Horizons ETFs has introduced two new options for investing in real estate. The Horizons BetaPro Equal Weight Canadian REIT 2x Daily Bull ETF (HREU) aims to deliver investment results corresponding to two times the daily performance of an equal-weighted index of REITs in Canada. Meanwhile, the Horizons BetaPro Equal Weight Canadian REIT -2x Daily Bear ETF (HRED) aims to deliver performance equal to two times the inverse of the same equal-weighted benchmark of Canadian REITs. Both ETFs have a management fee of 1.15%.

CI Global Asset Management rolls out alpha and beta ETFs

CI Global Asset Management has expanded its offering of CI Beta ETFs with the launch of the CI US Treasury Inflation-Linked Bond Index ETF. Trading on the NEO Exchange under the ticker symbol CTIP, it seeks to track a Canadian-hedged index of US Treasury Inflation-Protected Securities (TIPS). The firm has also launched the active CI Emerging Markets Alpha ETF, with two series (CIEM and CIEM.U) trading on the TSX. It seeks to invest in quality companies with long-term growth potential located in or serving customers in emerging markets.

CIBC rounds out its suite of index ETFs with two new funds

Building upon its launch of four core index ETFs earlier this year, CIBC Asset Management has unveiled the CIBC Global Bond ex-Canada Index ETF (CAD-Hedged) and the CIBC Emerging Markets Equity Index ETF, which are trading on the TSX as CGBI and CEMI,

respectively. CGBI aims to track the performance of the Morningstar Global ex-Canada Core Bond Hedged CAD Index, which focuses on investmentgrade debt securities with maturities greater than one year. CEMI tracks the Morningstar Emerging Markets Target Market Exposure Index, which offers exposure to the top 85% of the equity float-adjusted market capitalization in emerging markets.

Mackenzie adds to sustainable investment offerings

Mackenzie Investments has introduced the Mackenzie Global Sustainable Bond ETF (MGSB) on the NEO Exchange. Aiming to deliver a steady income flow along with the potential for moderate capital growth, MGSB invests primarily in fixed income securities, focusing on sustainable and responsible global issuers. The fund is managed by the Mackenzie fixed income team, which relies on a proprietary ESG integration process that analyzes more than 2,900 ESG performance data points.

Evolve launches the first multicryptocurrency ETF in Canada

Evolve ETFs has launched Canada’s first multi-cryptocurrency ETF on the TSX with the goal of providing a less volatile way to invest in the cryptocurrency market. Available in both CAD- and USD-unhedged units (trading as ETC and ETC.U, respectively), the Evolve Cryptocurrencies ETF invests in both Bitcoin and Ether, using an ETF structure to provide exposure to the currencies’ daily price movements. According to Evolve ETFs president and CEO Raj Lala, combining the two cryptocurrencies into one ETF allows Evolve “to dampen some of that volatility and hopefully capitalize on the cryptocurrency that’s significantly outperforming the other.”

Canadian banks on the move Having weathered the worst of COVID-19’s market impact, the Big Six have ample runway for growth, according to one ETF provider

Like most sectors of the economy, banks have faced a significant test over the past 18 months – and it’s one they’ve passed with flying colours. “When the pandemic started, banks and financials around the world fell about 50% in two months,” says Rob Wessel, managing partner at Hamilton ETFs. “Canadian banks declined less, as investors assumed correctly that they would not cut their dividends. That gave investors more confidence the group would bounce back faster, which they’ve done this year.” As the pandemic progressed, Canadian banks set aside more than $10 billion worth of reserves or allowances as a firewall against potential credit losses, Wessel says, and this buildup peaked a few quarters ago. Loan losses did rise, but not as much as anticipated, in part because the Canadian government’s fiscal transfers to citizens in need acted as a form of indirect credit support. Since then, banks have been able to start releasing these huge reserves, which has pushed earnings and capital to all-time highs. According to Hamilton ETFs, Canadian banks made more than $15 billion last quarter, an increase of more than 20% compared to before the pandemic. “Right now, the sector is still relatively inexpensive,” Wessel says. “At just over 10

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times forward earnings, they trade below historical averages.” That’s been good news for the Hamilton Enhanced Canadian Bank ETF (HCAL). Although it has modest 25% leverage, because it is more diversified, HCAL’s volatility profile is not much different from an individual Canadian bank. This small leverage supports a higher dividend yield.

“There’s still room in this recovery for banks to make above-average returns” “Investors in HCAL benefit from the sustainability of Canadian bank dividends and higher yield return potential than both covered calls and equal weight,” Wessel says. “We’ve been able to offer a yield north of 5%. Looking at HCAL’s returns since inception last October, it’s fair to say that the benefits of this structure have been validated.” Looking ahead to the next few quarters, Wessel expects at least another $4 billion to $6 billion of reserve releases, as well as strong earnings growth supported by pandemic recovery, including lower loan losses. Though the Liberals’ election promise to tax big banks poses some risk, he also anticipates a significant capital windfall that banks could use for share buybacks or acquisitions, noting that “there’s still room in this recovery for banks to make above-average returns.”

Q&A

Karl Cheong Head of ETFs, Canada FIRST TRUST PORTFOLIOS CANADA

Years in the industry 12 Fast fact Originally launched in the US in 2011, First Trust’s SKYY is currently the largest, most liquid cloud computing ETF available on American exchanges

Opportunity in the SKYY Your firm launched the First Trust Cloud Computing ETF (SKYY) on the TSX earlier this year. What makes it a compelling option to get exposure to the sector? SKYY provides exposure to US-listed cloud service providers that’s weighted based on their involvement in cloud services – IaaS, PaaS and SaaS – leading to more pure-play exposure as compared to market cap weighting. The ISE CTA Cloud Computing Index, which SKYY tracks, has outperformed the S&P 500 Index by 36% over the past three years ending August 31, 2021, and 178% since inception. And despite the increased ubiquity of cloud computing companies, most of SKYY’s holdings are not represented in broad equity benchmarks, including 72% that are not in the S&P 500. What tailwinds are supporting the cloud computing space? In the near term, pandemic-related trends are proving durable. Offices are transitioning to permanent hybrid workforces. Beyond that, remote schooling, virtual medicine and streaming content remain vital and are all based on cloud capabilities. Companies without adequate cloud capability were left with serious operational disadvantages over the past 18 months, and we think businesses will continue to invest in cloud capabilities to mitigate ongoing and future disruptions. Longer-term, global digitalization and connectivity trends are accelerating. Over the next five years, the number of connected devices is expected to grow from 25 billion to 35 billion; by 2035, the world is expected to have 2 billion more internet users. Seagate estimates that data worldwide will grow nearly 30% annually over the next five years, and 50% of the world’s data will be stored in the cloud by 2025, up from 25% in 2015. How might portfolio exposure to cloud computing companies benefit Canadian investors? Governments and central banks around the world have pulled forward future economic growth via all levels of quantitative easing, which implies lower expected equity market returns going forward. This begs the question: How can Canadians achieve their portfolio growth objectives in order to retire comfortably? We think cloud computing ETFs like ours can satisfy demand for a diversified portfolio of high-growth companies with the potential for better sales, operating margins and growth than the overall economy. What’s growth like in the industry? Over the past five years, the cloud market has grown at a rate of 36.3%. It’s an approximately US$330 billion market this year, with the potential to reach US$400 billion – and by some projections, US$800 billion – by 2025. According to a 2020 survey from IDG, 32% of IT budgets will be dedicated to cloud computing by 2021; 60% of organizations will be using an external cloud provider, up from 30% in 2018; and 92% of organizations have IT environments – infrastructure, applications and data analytics – that rely on cloud computing technology.

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14/10/2021 3:01:10 PM

UPFRONT

ALTERNATIVE INVESTMENT UPDATE

Divvying up real estate investments With its fractional homeownership model, BuyProperly aims to lower the barriers to the real estate market for young investors

begins with an AI model that analyzes 20 years of MLS data to find assets listed for less than their fair market value. Next, an investment committee checks the AI-generated shortlist of prospective deals and searches for more up-to-date figures and news about them to find potential red flags. The ones that pass that step are subject to an on-site inspection. “Nearly 40% of our investors are invested in multiple deals,” Jha says. “There are customers who have invested close to $100,000 in the last year and a half with us, which they’ve spread out in stakes of $15,000 to $20,000 in a given property.”

“We’re very particular about how we select the properties to bring to the platform” After experiencing the frustration of being priced out of the housing market, Khushboo Jha realized that young investors needed a way to participate in the wealth-building power of real estate. That led her to create BuyProperly, an online platform that lets users invest in quality properties for as little as $2,500. BuyProperly’s fractional homeownership model lets investors start small and spread their investment across different properties. Unlike typical property investments, there’s

NEWS BRIEFS

no need to make a large upfront financial commitment, which makes it easier to adopt dollar-cost averaging strategies. And because BuyProperly is entirely online, investors aren’t geographically constrained. “We know how valuable hard-earned, post-tax dollars are for regular middle-class people,” Jha says. “So we’re very particular about how we select the properties to bring to the platform.” BuyProperly’s three-stage selection process, which filters out 99% of deals on the market,

Hazelview unveils tech-focused venture capital fund

Hazelview Investments, formerly known as Timbercreek, has launched Hazelview Ventures, a new venture capital business that aims to partner with early-stage companies looking to break into the proptech, buildtech and cleantech spaces. In addition to providing funding to startups, the new business offers entrepreneurs the chance to test, refine and scale at an enterprise level by granting access to Hazelview’s platform of real estate properties and investments, including a $4 billion pipeline of multiresidential development projects.

While BuyProperly caters largely to selfdirected investors, Jha says the company has spoken to a lot of financial advisors who have traditionally focused on more affluent clients. By being able to discuss fractional homeownership options, she says, advisors will be more prepared to talk with nextgeneration clients about the benefits of real estate investment. “While some young people might not understand much about mutual funds or the bond and equity split,” Jha says, “I think somehow everybody understands real estate, and it’s something they’ll be more excited about.”

Purpose expands its structured product shelf

Purpose Investments has launched the Purpose Structured Equity Yield Plus Portfolio (PSY Plus), available as either a Series F or Series A mutual fund. Similar to Purpose’s other structured portfolios, PSY Plus uses derivativesbased strategies to seek long-term capital appreciation with less risk than the broad equity markets. Aiming to achieve a higher level of yield through the use of modest leverage, PSY Plus targets a net yield of 7%, to be delivered through stable, enhanced monthly return-on-capital distributions.

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14/10/2021 3:01:27 PM

Q&A

Judy Goldring

Filling the private credit portfolio gap

President and head of global distribution AGF MANAGEMENT

Years in the industry 23 Fast fact In late August, AGF expanded its partnership with alternative capital provider SAF Group and is now the exclusive provider of SAF’s investment capabilities to the Canadian retail marketplace

Why might investors want to consider exposure to private credit markets? Since 2008, we’ve seen growth of over 200% in the private credit space, making it one of the fastestgrowing alternative sub-products. We’ve also seen global AUM and flows almost double in the last six years in the space. We’re also seeing a very conducive market environment. Persistent low rates have driven investors to demand and seek out opportunities for higher yield compared to traditional fixed income, and private credit certainly offers the potential for that. During the COVID crisis, we saw a period of low competition and distorted asset prices, which allowed experienced managers to uncover interesting opportunities. COVID also accelerated the transition of banks out of the middle- and lower-middle-market lending business, which currently provides a very attractive illiquidity premium.

You’ve bolstered your commitment to private alternatives through an expanded partnership with the SAF Group. What was the thinking behind that? Fundamentally, at AGF, we believe that alternatives are an important building block for a diversified and well-constructed portfolio. However, access to the private alternatives space has typically been in the hands of much larger institutions and out of reach for investors broadly. Through the partnership with SAF, we’re able

Pender introduces two new liquid alternative funds

PenderFund Capital Management has launched two new liquid alt mutual funds. A flexible, high-yield-focused alternative credit strategy, the Pender Alternative Absolute Return Fund aims to generate positive absolute returns throughout the economic cycle with “a combination of current income, active trading and dynamic hedging,” according to PM Justin Jacobsen. The Pender Alternative Arbitrage Fund, run by Amar Pandya, aims for consistent and low-volatility absolute returns by investing primarily in merger arbitrage opportunities.

to create and construct products that can provide expanded access to the private credit space, making them more available to retail investors and institutional investors who are seeking income, diversification and also liquidity.

You recently launched two private credit solutions for the Canadian retail space as part of your partnership with SAF. What should investors and advisors know about them? In July, we launched the AGF-SAF Private Credit Limited Partnership. That is available to accredited investors and more targeted to smaller institutions and family offices. Within that vehicle, SAF implements its sophisticated private credit strategies, particularly focused on loans to mid-market borrowers. And with banks retreating from the space, it’s allowed SAF to create a more diversified portfolio with low correlation to traditional asset classes, which looks to achieve risk-adjusted returns that are quite attractive. We’ve also put a wrapper on that LP by creating a trust vehicle, the AGF SAF Private Credit Trust, which is available to retail accredited investors and other eligible investors. It also aims to deliver attractive riskadjusted returns, has a low correlation to traditional asset classes and generates higher income than traditional fixed income. But it also has downside protection for the retail investors and offers relatively more liquidity by having around 15% of the portfolio exposed to a combination of ETFs and mutual funds from the AGF shelf.

Next Edge Capital launches strategic metals fund

Alternative investment firm Next Edge Capital has launched the Next Edge Strategic Metals and Commodities Fund. Subadvised by Delbrook Capital, the fund invests in equities issued by companies involved in commodities and natural resources, as well as those poised to benefit from rapid technological innovation. According to Next Edge Capital, the fund should benefit from shortages in certain commodities due to long-term underinvestment, as well as demand drivers such as the transition to clean energy.

Jarislowsky Fraser enters into PE partnership

Jarislowsky Fraser has formed a strategic relationship with HarbourVest Partners that will give eligible institutional and ultra-high-net-worth clients access to a global private equity platform. According to Jarislowsky Fraser president and CEO Maxime Ménard, “this private equity solution offers institutional investors and UHNW individuals focused on multi-generational wealth preservation an innovative product for this lower rate environment and adds to the wide range of investment solutions for our clients.”

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14/10/2021 3:01:30 PM

UPFRONT

OPINION

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

A tipping point in tech Detractors might claim its moment has passed, but the tech sector is entering a massive growth phase that investors can’t ignore, writes Jesse Gamble TECHNOLOGY STOCKS dominated other sectors last year, prompting some investors to ponder: “Is the tech trade over? Is it time to pounce on the next big thing?” Selected technology stocks directly related to the global shift to working from home certainly had their moment to shine, while others were pulled along in a wave of undue speculation. We have seen many market pundits declaring this the end of the technology trade, urging investors to clamour for value stocks. However, the actual technology sector is just beginning a massive growth phase that every investor should explore. The innovation unfolding within technology today is multiplicative, not merely additive, as improvement in one technology leads to improvement in another. The growth in the next five years will not be a mirror image of the growth during the last five years. The next decade is poised to be transformational as several critical technologies achieve escape velocity. While Donville Kent is geographically agnostic between Canada and the US, most of the tech companies grabbing our attention are listed in Canada. The following are our top picks across various tech verticals. E-COMMERCE. Wishpond Technologies (WISH.V) provides digital marketing solutions and cloud-based software to assist SMEs with a range of marketing initiatives, including lead generation, sales conversion and analytics. The company achieved record quarterly revenues, with 73% year-over-year growth in the second quarter of 2021 driven

by strong organic growth and contributions from the acquisitions of Invigo and PersistIQ. FINTECH. Nuvei (NVEI.TO) is a global payment technology partner with a proprietary platform that provides seamless pay-in and payout capabilities, connecting merchants with customers in 200 markets worldwide. The company provides support for more than 470 local and alternative payment methods and nearly 150 currencies and 40 cryptocurrencies. Its revenues skyrocketed by 114% in Q2, driven by a 146% increase in the total dollar value of transactions processed by merchants. Nuvei recently announced the acquisition of Simplex, a payment solution provider for cryptocurrency. DIGITAL ASSET MANAGEMENT. MediaValet (MVP.TO) offers the largest global footprint of any digital asset management solution. In Q2, the company increased revenues by 29%, and 90% of that came from monthly recognition of annual SaaS subscriptions. MediaValet has a diverse annual recurring revenue base, with no sector representing more than 12%, and its pipeline is growing rapidly. Consolidation in the space suggests MediaValet would be a strong acquisition target based on product growth rates. HEALTHCARE. Vitalhub (VHI.V) provides software for healthcare providers to manage e-health records, patient flow and case management. Revenues soared by 111% (80% of which is recurring) in Q2. The company recently announced the acquisition of Alamac,

a data analytics business focused on patient safety, patient plans, patient outcomes and patient flow – its 11th acquisition since 2017. Vitalhub has received conditional approval to uplist to the TSX. CYBERSECURITY. Plurilock (PLUR.V) offers identity-centric cybersecurity for today’s workforces, enabling organizations to operate safely and securely while reducing cybersecurity friction. The company received orders ranging from $140,000 to $1.9 million in July and August across a variety of clients, including NASA, the US Department of Defense, a California state retirement manager and a leading overseas financial institution. VIRTUAL REALITY. Urbanimmersive (UI.V) is a SaaS business management solution providing mission-critical solutions to visual content providers in the real estate market. Using cutting-edge 3D and videoconference technologies, Urbanimmersive’s solutions enable real estate agents to create a virtual open house. The company just acquired real estate photography agencies EGP Technovirtuel, Graphique ID Solutions and La Clique Mobile. We have entered an era where companies literally cannot operate without software. These business models are superior to almost any other business model out there. They are asset-light, sticky, scalable and high-margin. If you want to outperform and achieve outsized returns, prioritize investing in markets that are growing exponentially. When it comes to digital innovation, victory goes to the swift. At Donville Kent, we are excited to continue finding, researching and ultimately investing in the best innovations over the next decade. Big companies start as small companies, and we will keep focusing on finding the next great investments in the small-cap space. Jesse Gamble is a senior vice-president and portfolio manager at Donville Kent Asset Management, where he co-manages the DKAM Capital Ideas Fund with founder Jason Donville.

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16073

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2021-08-20 2:07 14/10/2021 3:02:09 PMPM

PEOPLE

INDUSTRY ICON

CHASING THE DREAM OF INDEPENDENCE Over a multi-decade career, Charlie Spiring has worked tirelessly to promote innovative, client-first thinking in Canada’s wealth management industry – and he’s not done yet

CHARLIE SPIRING took an interest in finance at a young age. As a kid growing up “on the wrong side of the tracks,” he says he always thought the door into the financial industry only opened for people from silverspoon families. But shortly after earning a commerce degree from the University of Manitoba in 1979, Spiring got his start as a rookie broker. He describes the financial industry back then as a “run-and-gun business”: A research report would come down from the head office, and brokers would trade like mad as they pushed investment ideas hard on prospects and clients. Things have changed since then, which Spiring attributes to banks’ actions to raise the bar on professionalism. But even at the time, he felt let down. “I was expecting the research analysts and the people on the inside to be much more in the know,” he says. “But when you pulled the curtain back, there was clearly a lot of room for improvement. And I thought if someone ever focused on that, we could do a lot of good for the industry.”

Dreaming in Technicolour Spiring harboured those feelings for the better part of 10 years, all the while establishing himself as an upstanding investment

advisor. Then, in 1993, he joined forces with a handful of other like-minded individuals and founded Wellington West, which would eventually turn out to be an industry-shaping firm – though he had no idea at the time. “Admittedly, I didn’t know what I didn’t know,” he says. “But I always dreamed in Technicolour, and I really believed that we could have something much better by taking away the bureaucracy and hot air that large

people the freedom to take chances and make the occasional mistake; anyone could sit at the table as long as they had good ideas. Through these and other practices, the organization managed to foster an innovative, client-first culture. Spiring says the original plan was to create a “Prairie powerhouse” firm in Western Canada. But the business took on a life of its own and expanded its footprint well into the

“If we didn’t treat each person like a number, and we let them be creative and add value and be client-focused, I thought it could be a home run. And it turned out I was right” firms were spewing at the time. And I knew a lot of leaders in the financial industry came from Winnipeg, so I thought, ‘Well, why couldn’t that be me?’” It wasn’t long before other advisors joined the Wellington West movement. Calling on his common sense and a work ethic that he credits to his parents, Spiring was able to attract people and help them raise their upper barriers. Wellington West gave

east. As the outsourcing model became more available and it became easier to reliably hand off back-office work, Wellington West was able to achieve a scalable model that let advisors run practices that were more focused on planning and client service. “If we didn’t treat each person like a number, and we let them be creative and add value and be client-focused, I thought it could be a home run,” Spiring says. “And it

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PROFILE Name: Charlie Spiring Title: Founder and chairman Company: Wellington-Altus Private Wealth Based in: Winnipeg, Manitoba Years in the industry: 41 Career highlight: Establishing a leading independent Canadian advisor network – twice

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PEOPLE

INDUSTRY ICON

turned out I was right.” Over the course of nearly 20 years, Wellington West grew from just six founding members to a 666-strong network of partners. Around that point, National Bank was looking to expand its business across Canada and made an offer to acquire the firm. While Spiring personally wasn’t ready to cash out of the business, many partners were keen to retire. After much soul-searching, he decided to let go, and National Bank acquired Wellington West for $333 million in 2011. As part of the deal, the bank welcomed Spiring as the vice-chair of National Bank Financial Wealth Management’s executive committee. It was a good relationship. The bank was very open to innovative thinking,

the firm’s second, third and fourth anniversaries, propelling it to nearly $20 billion in assets under administration. “We’re in our fourth year, and it’s been our best ever,” Spiring says. “I think no one’s ever done this before in the retail wealth area, so I’m pretty excited.” The firm is well positioned for more growth ahead. In the US, the wave of advisors choosing independent firms is cresting, and Spiring is convinced that trend will carry over into Canada during the next five to 10 years. He’s also quick to embrace the delegated style of money management as the best and brightest ideas become accessible for lower and lower costs, opening more opportunities for planning and advanced wealth management.

“I could see a vision of what I’d learned and built in Wellington West. I knew we could go back and build something that’s just remarkable”

WELLINGTON-ALTUS BY THE NUMBERS

2017

Year founded

Number of offices

Advisor teams which Spiring had in spades; he had no interest in getting sucked into the bureaucratic machinery and reporting processes, and the bank was more than happy to give him elbow room. But even that wasn’t enough for Spiring to settle down completely. “I could see a vision of what I’d learned and built in Wellington West,” he says. “I knew we could go back and build something that’s just remarkable.”

A return to independence In early 2017, Spiring left National Bank and got together with two other colleagues to found Wellington-Altus Private Wealth. It took practically no time for the firm to find success; by its first year, it had become the most successful new investment firm in Canada’s history. That growth continued through

While Wellington-Altus Private Wealth is seeing explosive growth on the IIROC platform, Spiring is also looking at welcoming bright minds from the ICPM platform who, after setting up their own shops 10 or 20 years ago, are now thinking about how to step away gracefully and monetize their hard work. The same story is playing out at some asset managers, which Spiring sees as a potential third leg of the stool in his firm’s continued expansion in Canada. “I’ve really been reticent to go back in the capital markets area,” he says. “So we’re going back to our friends in the industry and have our people refer into them. Some of the bank firms have caught onto it, so even as we’re attracting brokers from their retail side, we’re helping to renew their capital markets side business. It’s amazing.”

30,000

Clients served

Nearly $20 billion Assets under management

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14/10/2021 3:02:40 PM

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14/10/2021 3:02:46 PM

FEATURES

ETF INNOVATION

The next big thing in ETFs Canada’s ETF space is full of funds aiming to capitalize on emerging technologies and promising to address investors’ biggest concerns. Wealth Professional takes a closer look at some of the year’s most exciting trends and innovative products “NOT ALL these names will be winners” is the warning advisors often get when they’re presented with an innovative sector in an ETF wrapper. By its nature, real innovation often involves failure before success, but the growth potential for the winning companies is vast. The race to find those enduring names is, therefore, intense. One only needs to look back at recent months to see how the healthcare and clean energy industries have been supercharged by the pandemic.

Then there’s North America’s headline act in the disruptive technology space, ARK Invest, whose approach is available to Canadian investors through Emerge Canada’s suite of ETFs. ARK puts innovation at the heart of its funds, whether it’s drones, genomics or electric vehicles. Other thematics that have garnered attention this year include space, cloud computing, cryptocurrency and psychedelics. Of course, not all innovations revolve around an eye-catching new technology. Some

innovative ETFs focus more on addressing core portfolio needs or tackling one of the most pressing investment issues of our time – income. The beauty of ETFs is their accessibility, liquidity and flexibility in helping advisors construct a portfolio. With that in mind, Wealth Professional wanted to take a deeper dive into some of the big innovation themes that have dominated the ETF market in recent months to determine whether they merit a closer look by advisors.

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THEMATIC INVESTING As the head of ETFs at Mackenzie Investments and chair of the Canadian ETF Association, Michael Cooke has a front-row seat to the workings of the ETF ecosystem. He’s watched with interest the rise of thematic investing, which has allowed advisors to finely slice and dice various segments of the financial markets. While some advisors have particular views on a sector or asset class – and are willing to do their own research – many don’t want to worry about individual security selection when they can have it bundled together in a relatively cost-effective and liquid vehicle. However, Cooke warns advisors to be careful about how they use thematic ETFs. He says it’s vital to have a foundational asset allocation that serves as the core of the portfolio based on the client’s tolerance for risk, timeframe for investment and return or income objectives. Around that, advisors can introduce thematic satellite investments that offer growth potential and alpha generation through innovation. “But there’s also some risk inherent because a lot of these sectors are new,” he says. “They’re composed of a disparate group of companies, some of which are going to survive, some of which are profitable, some of which are not. And because they are disruptive technologies, they’re also going to be prone to volatility – and sometimes volatility is the enemy of successful and prudent investment. Make sure you’re measured in how you allocate to these strategies, and don’t get carried away in your enthusiasm by the impressive headlines and performance that some of these strategies can put up because you can give it back.” That said, Cooke admits it’s hard not to be excited by the innovation taking place right now. He says the emergence of blockchain is to Bitcoin what the internet was to email. Blockchain continues to disrupt and

ETF FLOWS REACH NEW HEIGHTS ANNUAL FLOWS FOR CANADA-LISTED ETFs $50bn

$40bn

$30bn

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$10bn

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Source: Canadian ETF Association and National Bank Financial

“That’s a hallmark of the ETF industry – delivering inaccessible exposures to investors of all types” Michael Cooke, Mackenzie Investments democratize the global economy, although it remains volatile. Its most popular byproduct, cryptocurrency, is at the forefront of thematic ETFs – just this year, Purpose Investments launched the world’s first Bitcoin ETF, Horizons ETFs began offering an inverse Bitcoin ETF, and Evolve ETFs recently launched Canada’s first multi-crypto ETF. “Cryptocurrency ETFs have drawn a good cross-section of different investor segments,” Cooke says. “Interestingly, some are drawing institutional investors, both domestic and offshore financial advisors, and, of course, DIY investors. All these investors are seeing the benefits and versatility of the ETF structure.”

Beyond “flashy” ETFs like Bitcoin, Cooke sees innovation “even in something as seemingly vanilla as index design,” which he believes has incrementally improved the investor experience. The ability of ETFs to incorporate emergent asset classes, such as those focused on China’s massive economy, has also caught his eye. “It’s fair to say that almost all institutional and retail investors are underweight in their exposure to the massive economic engine that is the Chinese economy,” Cooke says. “A lot of intelligent people believe there are emerging two poles of economic growth globally, one that is the US and one that is

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FEATURES

ETF INNOVATION

led by China. It’s prudent for investors to think about that. “Yes, it does come with a little bit more risk and other considerations that have to be weighed into the mix, but it does represent innovation as a type of investment that has been previously very difficult for investors to access. That’s another hallmark of the ETF industry – delivering inaccessible exposures to investors of all types.” Sustainable investing is an area that’s been pushed to the front of a lot of investors’ minds as the COVID-19 pandemic has exposed the fragility of our world. While clean energy innovation has been around for a while, its importance to society has probably never been greater, Cooke says, and sustainable bonds represent a fastgrowing subset of the responsible investment landscape. Within that category are green bonds, which are designed to finance various climate-related or environmental projects, and sustainability-linked bonds, which are related to companies that score well on proprietary ESG metrics. Mackenzie launched a global sustainable bond ETF in September that has already garnered interest from institutional investors. Cooke believes sustainable bonds are an emerging space within the fixed income market – and another example of how innovation can take different forms. “We continue to look at the spectrum of innovation and where we might find opportunities, but we’re always focused on what we think are our sustainable, enduring investment themes,” he says. “We’re not just trying to latch onto the flavour of the day, which might be nice in the short term in terms of gathering excitement and assets, but we want ideas that are durable and can have a rightful place in investor portfolios. “There are obviously indirect ways to play some of these innovation themes through more core portfolios. We’re well down the path of looking at how we might add some of these innovative ideas to our shelf, but we want to do so prudently and to make sure they have some staying power.”

BITCOIN As a proud innovator, Purpose Investments founder and CEO Som Seif didn’t hide his desire to win the race to launch the world’s first Bitcoin ETF. Of course, he knew his team had to “hurry up and do the work,” but equally importantly, Seif knew they had to get it right. Eight months of dialogue with regulators preceded the race to market and a flurry of headlines and interviews. Ultimately, Purpose beat Evolve ETFs to market by just one day – a small margin, but one that was reflected, initially at least, in contrasting levels of inflows. Achieving a world first was always going to be a big deal, but Seif admits he was taken aback by the attention garnered by the new ETF, which trades on the TSX under the ticker symbols BTCC.B and BTCC.U. The fund is backed by physically settled Bitcoin, not derivatives – undoubtedly a difficult asset to package, and Seif credits his team not just for its speed to market, but also for getting the technical elements correct. As for how Purpose’s Bitcoin ETF came to be, Seif says the company had been in ongoing conversation with the Ontario Securities Commission after filing privately in the summer of 2020. While the OSC was open to supporting innovation, he says the product required a lot of “technical plumbing.” While much of the launch narrative centred around the race to claim the “world’s first” title, Seif says it was still para-

mount that the process was not rushed and the product was sound. “We actually took an extra day longer,” he says. “We could have been out on a Wednesday [rather than the Thursday] because we wanted to make sure everything was right. And I’m glad we did, of course, but at the same time, we are also glad we didn’t rush it because there was a lot of work with the broker-dealers, trading market makers, and we brought to bear some amazing liquidity partners. “It’s amazing to step back and see the impact it’s had, and the awareness and attention it’s gotten globally. It’s also been great to see the excitement and understanding of how this kicked off a lot more acceptance of this asset class as a core position for many institutions and industries that historically haven’t been able to do so. Leading into [the launch], I knew it was going to be a big deal, but to get it out and see it in real time was quite amazing.” Unlike traditional assets such as stocks or bonds, which settle within two or three days of the transaction date, digital assets like Bitcoin settle instantaneously – by their very nature, they don’t want a third party. Bridging that gap required a lot of work with regulators; Purpose had to answer questions about how the digital asset is owned and what risks were involved. To address that, Seif and his team created an ETF where every dollar of the fund is backed by $1 of real Bitcoin in stored wallets,

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with the wallet effectively acting as the custodial account. There is no leverage – it’s $1 to $1. But is it safe? “We had to ensure we could store it in what I call a cold wallet,” Seif explains. “There are two forms of storage – a hot wallet, online, and a cold wallet, offline. If you have a hot wallet, it’s exposed to the systems; people can hack it. A cold wallet is effectively unplugged; it’s offline and like putting it underneath your pillow – it’s impossible for someone to hack. We wanted to make sure that 100% of the time we owned the asset, it was 100% in a cold wallet, and we’ve done that. From the minute it goes from a cold wallet to the markets to sell, it’s instantaneous, so we never take any market

“It’s amazing to step back and see the impact it’s had, and the awareness and attention it’s gotten globally” Som Seif, Purpose Investments risk of being able to be hacked.” Seif, who also founded Claymore Investments, which he sold to BlackRock in 2012, believes that for every crypto enthusiast or believer, there is likely a cynic, especially in financial services. He understands this because he was once a doubter before taking the initiative to delve a little deeper. “I realized that’s not who I am,” he says.

“I’m an innovator, I’m a technology-focused person, and I like to see change. I said [to myself ], ‘I’m going to go and spend the time to learn.’” After a year-long deep dive, Seif emerged with his mind opened. Four years later, that journey is ongoing, but his view is clear: There are fascinating opportunities ahead with digital assets.

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“Don’t let anybody else formulate your opinion,” he warns advisors. “Just because you hear someone with grey hair who thinks this is going to be disruptive talk about it negatively, why don’t you go find out why they’re afraid of it because that’s really what is fascinating. When the Bank of Canada and central banks around the world talk about this, or the CEO of a bank like JPMorgan says, ‘This is a scam,’ they’re saying that because they’re afraid of what it could mean. That’s not the right approach as to why you should formulate your opinion.”

CRYPTOCURRENCY ETFs DOMINATE THE TOP LAUNCHES OF 2021

3iQ CoinShares Bitcoin ETF AUM: $2.4 billion

Purpose Bitcoin ETF (CAD-Hedged) AUM: $1.3 billion

CI Galaxy Ethereum ETF AUM: $763 million

3iQ CoinShares Ether ETF AUM: $733 million

CI Gold Bullion Fund ETF (CAD-Hedged) AUM: $551 million

Ninepoint Bitcoin ETF AUM: $331 million

CI Galaxy Bitcoin ETF (CAD-Unhedged) AUM: $308 million

Purpose Ether ETF AUM: $275 million

Harvest Travel & Leisure Index ETF AUM: $205 million

NBI Sustainable Canadian Corporate Bond ETF AUM: $184 million Source: Investor Economics, as of August 31

MULTICRYPTOCURRENCY One of the ETF industry’s enduring qualities is its ability to take complex issues and present them to investors in a relatively simple way. While the machinations of blockchain and the cryptocurrencies it produces can be difficult for the average investor to grasp, Evolve ETFs recently distilled it into North America’s first multi-crypto ETF, the Evolve Cryptocurrency ETF (ETC). The fund’s genesis began earlier in the year when Evolve was just a day behind Purpose Investments in launching its Bitcoin ETF. Evolve followed that by being the first in the world to debut an Ether ETF, providing exposure to the second largest cryptocurrency. That same month, Ether went up 50% and Bitcoin went down 4.2%, and investors were immediately asking whether there was a way to invest in crypto as a category to get exposure to more than just one currency. Evolve took that idea and kept it simple – the

Evolve Cryptocurrency ETF is passive, holds Bitcoin and Ether ETFs as a fund of funds, is market-cap-weighted, and is rebalanced every month. According to Evolve CIO and COO Elliot Johnson, it’s the ideal set-it-and-forget-it product for those who want exposure to both cryptocurrencies – but he believes the real potency of the ETF could be yet to come. “If the regulators allow for other cryptocurrencies to be put into an ETF – so let’s say Evolve were to launch a Polkadot ETF, or one of the other cryptocurrencies – we can add that to this fund and increase the scope of its reach,” Johnson explains. “That’s not to say we can just add anything we want – we have to launch those other cryptos in their own ETFs, they have to be approved by the regulators, and we have to be able to get them launched. But if we were able to do that, it’s a bit of future-proofing as the market develops. As we do more in cryptocurrencies, then the product becomes better over time. It’s pretty straightforward, but it’s something we got asked about from day one, so we’re happy to

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SEMICONDUCTORS

“As we do more in cryptocurrencies, then the product becomes better over time” Elliot Johnson, Evolve ETFs bring it to market.” More cryptocurrencies in the fund would help advisors smooth out a volatile asset, and Johnson is excited to see more investors using cryptocurrencies as a portfolio tool, like they would a gold ETF. Another trend Johnson has his eye on, which Evolve invests in via the Evolve Innovation Index ETF (EDGE), is 5G networking. The rise of 5G is connecting even more devices to the internet, in turn sparking the need for greater cybersecurity – another huge growth driver and theme in Evolve’s ETF suite via its Evolve Cyber Security Index Fund (CYBR). Johnson says the key is that mobile devices are increasingly interacting with the world and understanding what’s around

them. The way cloud services combine with smart device information, whether it’s GPS or other sensors, is changing our world. “Those end points need to be secure, and I think cybersecurity is going to be very relevant,” he says. “The model has changed – 30 years ago, each computing device was its own thing, and it lived in isolation. Now nothing lives in isolation; everything’s connected. Put your phone on airplane mode, and it’s not a very fun thing to have in your pocket anymore. You need to be on the network. “It’s mobile communication and smarter devices combined with the cloud. This is how the world is changing, and cybersecurity is at the centre of that. You can’t do any of this stuff if you don’t have secure data.”

Within the collaborative brainstorming rooms at Horizons ETFs, there is a mantra: No idea is too crazy. Horizons knows success often comes down to being an early adopter of ideas that many may be skeptical of – so the team’s job is to look at demographic and investment trends and analyze early-stage ideas, even if they seem provocative at the time, says Mark Noble, Horizons’ EVP of ETF strategy. Take marijuana – Horizons launched the word’s first cannabis ETF back in 2017, when the drug wasn’t even legal yet in Canada. In the years since, marijuana has gained increasing social and government acceptance. This year, one of Horizons’ standout offerings is its new Global Semiconductor Index ETF (CHPS), a theme Noble was shocked to find wasn’t already in the Canadian marketplace. It’s investment common sense, he explains, to look at what powers the likes of cloud computing, electric vehicles and blockchain. “If you think of the 20th century, when industrialization was powered by oil and gas, that was, therefore, the key commodity,” Noble says. “The 21st century is being powered by data – and to use data, you need semiconductors. Semiconductors are the new commodity in terms of powering the global economy; they’re at the core of everything.” As entire economies and supply chains are being reoriented around this technology, similar names – like Nvidia, AMD and Intel – are cropping up in thematic ETFs in sectors like smart automobiles, robotics or AI. Another core commodity of the modern age is lithium, which is needed for the batteries in electric cars. “It doesn’t matter if Tesla or GM or Google Waymo wins the electric car battle,” Noble says. “Eventually they’re all going to have the same components in their vehicle manufacturing, which means you can capture a lot of the upside of these trends by investing in the key components that go into these various forms of exciting new technologies.” It’s a critical point for advisors as they look to give their clients exposure to areas of poten-

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FEATURES

ETF INNOVATION

“Semiconductors are the new commodity in terms of powering the global economy; they’re at the core of everything” Mark Noble, Horizons ETFs tially huge growth. Noble uses the example of Palm Pilot and Blackberry, which were both market leaders at one point in time. Neither are relevant anymore, as they failed to keep up with change and were swiftly overtaken. The message: Don’t invest in the names grabbing the headlines; instead, look at what’s powering these brands because whoever wins the race will need the same components. That’s why Horizons’ key launches in 2021 have been focused on semiconductors, lithium, uranium and hydrogen. “These are

all fuels and tech components of the future that are going to have a broader impact in how people use technology and build new economies in the next couple of decades,” Noble says. The difficulty in constructing these products often lies in building an index. Horizons has started using AI screens with its index provider to go through balance sheets to see how much of a company’s business is actually directed to these themes. Noble believes that’s one of the only ways to screen early-stage

sectors that aren’t yet fully established. “Tomorrow’s sectors are today’s themes, but creating themes takes a lot more work on the product development side to do the due diligence and know that the companies you own in your ETF are in a leadership position,” he says. “For that reason, you’ll notice that the fees on a lot of these thematic ETFs are a bit higher, which reflects that research into these areas is a lot more comprehensive than it would be with a traditional index or sector strategy.” In echoes of the marijuana industry in 2016, Canadian capital markets are showing leadership in psychedelics, prompting Horizons to notch another world first in 2021 – the Horizons Psychedelic Stock Index ETF (PSYK). For those suffering from severe clinical depression, studies suggest that psilocybin can have real benefits on mental health. The sector is gaining traction as a therapeutic alternative to antidepressants, and the market is potentially huge. However, it remains at a very early stage and differs from marijuana in that it’s not a consumer market, but dependent on companies getting FDA approval. “But what we’ve seen with our ETF, which has been pretty successful to date, is that people are very excited still about the drug approval process and for some of these companies to use psychedelics for therapeutic use,” Noble says. As more and more innovative thematic ideas come into the marketplace, Noble cautions advisors that it’s vital to look at whether fund providers are bringing something new to the table or just rehashing an existing index or sector exposure. “Why would I pay 30 or 40 basis points for something that has an exciting technology name but really is just Nasdaq 100 exposure?” he says. “When you’re looking to get into newer ETFs or thematic ETF ideas, it’s really important for the investor to ask, ‘Are these companies or sectors I don’t have exposure to?’ If that’s the case and you believe in the theme, there’s probably somewhere you can fit it into your portfolio allocation.”

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SPACE Mention space to the average investor, and they’re likely to think of Elon Musk and Jeff Bezos sending people into orbit for astronomical fees. But underneath these headline events is a massive amount of innovation and growth, says Paul MacDonald, CIO at Harvest Portfolios Group – and billionaires flying up into low Earth orbit is just a small component of what’s going on. It’s why the company launched the Harvest Space Innovation Index ETF (ORBT) in April, tapping into an area with an abundance of “true innovation” that MacDonald believes will only become more and more apparent as the years pass. Building on the success of its thematic offerings, in particular its Blockchain Technologies ETF, Harvest’s space ETF is a passive, equally weighted fund of 40 global space-related companies. “There’s a tremendous amount of investment going on in space, and there’s a tremendous amount of development across multiple areas within what we would call the space economy,” MacDonald says. “This is unquestionably one of the areas we think has true innovation. As we look at three, five, then even further out over 10 years, it’s only going to become more apparent to the broader investment community.” MacDonald says the dominant area in the space economy right now is satellites – at the start of the year, there were about 3,000 active satellites in orbit, and there are now more than 4,000. These are primarily used for communication, like broadband or devices in remote areas, but their potential is vast, especially considering the growth of autonomous vehicles and the bandwidth they need. Another area ORBT considers is space exploration. While cynics might dismiss them as something out of a Star Trek movie, MacDonald points out that these projects – including NASA’s Artemis project, which aims to establish a sustainable human presence on the moon – require equipment and rockets provided by public companies.

“There’s a tremendous amount of development across multiple areas within what we would call the space economy” Paul MacDonald, Harvest Portfolios Group “Then there are things people don’t even think about, like space debris,” he says. “How do you track that? Well, Lockheed Martin, one of the large aerospace and defence companies, can track debris down to the size of a marble. With the exponentially growing number of satellites, and therefore more debris, that’s going to require more monitoring. Those types of businesses are positioned for this secular long-term growth that we’re seeing in the space economy.” MacDonald believes that for advisors, this thematic area represents an opportunity to capture some alpha through above-market growth. While ORBT’s portfolio houses some recognizable names, it also includes less wellknown ones that have greater potential and are uncorrelated with what most Canadians have in their portfolios. “There’s a unique diversification benefit for that growth sleeve of someone’s portfolio,” MacDonald says. But what about space tourism – if a billionaire can do it now, maybe we all can someday? While MacDonald is excited to see

what the technology can do, he doesn’t see this area as a driver of growth. Instead, he’s focused on satellites, the massive increase in the number of launches and the huge amount of equipment associated with them. “All of that is much more valid in the shorter term,” he says. “It’s really interesting what’s happening with space tourism, but I think that’s probably a little bit further [down the line].” Still, there’s no getting away from the fact that this is a rare investment story that carries the ‘cool’ factor. Through an ETF like ORBT, which offers exposure to cash-flowgenerating public companies, investors have the chance to tap into a space economy that’s estimated to generate revenue of around $350 billion, growing to $1 trillion by 2030. “We need to be educating people,” MacDonald says, “saying that this should be in the growth sleeve of your portfolio, in areas that you’re looking out over the next 12 to 24 months, and where you’re looking for some alpha capture with differentiated holdings.”

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FEATURES

ETF INNOVATION

SPONSORED

HEALTHCARE To some, the COVID-19 pandemic means every healthcare product and treatment will be fast-tracked to market and every diseasefighting pharmaceutical company is, therefore, a surefire winner. But Tarik Aeta, global healthcare analyst at TD Asset Management and co-manager of the TD Global Healthcare Leaders Index ETF (TDOC), believes the pandemic shouldn’t obscure the healthcare sector’s big-picture narrative: that demographics and innovation were driving broadbased growth even before a deadly virus ripped through the globe. It’s those two tailwinds that TDOC aims to tap into to help deliver better outcomes for investors. According to Aeta, the pandemic has actually had a mixed impact on the sector. While life science tool companies have benefited from the increased demand for COVID-19 testing and diagnostics, and

the likes of Moderna, BioNTech and Pfizer have led the way in vaccine development, other names have suffered. For example, medical device companies that produce things like pacemakers, artificial heart valves and surgical robots have been hurt because people simply haven’t been going to the hospital as much as they once did. However, in 2021, this industry is starting to recover. “A lot has been said about how the COVID-19 pandemic has accelerated the growth in the sector,” Aeta says. “While this might be true for certain pockets of healthcare, such as for mRNA vaccines, on the whole, the acceleration of growth has really been over 20 years in the making, with decades of investments finally reaching commercial maturity across several verticals in recent years, ranging from genomics to intelligent medical devices.” While awareness of healthcare has undoubtedly increased during the pandemic, Aeta says, the jury is still out as to whether the events of the past 18 months mean treat-

ments will come to market quicker. That’s because COVID-19 vaccines benefited from large-scale government funding, clinical trial stages run in parallel and accelerated approval pathways – plus the simple good luck that the SARS-CoV-2 spike protein is an effective target, which helped in more quickly designing a vaccine. In contrast, creating personalized cancer vaccines, which is one of the key goals for mRNA technology in the future, is a much more complicated task. Taking a broader view than just the COVID-19 pandemic, TDOC targets what Aeta calls the 3 Ds of healthcare: the companies discovering drugs, the companies developing widgets and the companies delivering services. The first bucket, discovering drugs, features pharma and biotech companies and includes innovation around antibody-based therapies, traditional small-molecule drugs, and emerging gene therapies and cell therapies. The mRNA vaccines have been front

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and centre in this segment during the pandemic. One of the benefits of TDOC is that all names in the ETF are capped at 2%. While some of the mega-cap pharma names have a lot of innovations, they are subject to expiring drug patents on their existing portfolio, which limits how fast they can grow. The 2% cap allows for more large- to mid-cap companies to gain exposure within the ETF, which may provide more long-term growth potential. The second bucket focuses on firms developing widgets, including medical device companies designing the likes of pacemakers and continuous glucose monitors. These names benefit from tailwinds in the sector and are not subject to the same patent restraints as new product iterations, which helps in extending the patent life. Within this

doctor or require certain procedures. While Aeta expects some of the growth in virtual care to slow down as clinics fully reopen, he believes that, structurally, the genie is out the bottle and that growth will continue in the years ahead. TDOC relies on an index strategy, tapping into the wealth of in-house experience at TDAM, in partnership with German index provider Solactive, to provide a low-cost solution for Canadian investors who want exposure to healthcare, says Jonathan Needham, VP of ETF distribution at TDAM. Critically, Needham says, TDOC addresses the tendency for home bias, which can cause investors to miss out on the sector’s global growth potential. For example, while the S&P 500’s healthcare exposure stands at

“Once the reopening trade is over, I’m confident, given a multi-year horizon, that healthcare has a great chance to outperform” Tarik Aeta, TD Asset Management bucket, investors also get exposure to the life science tool companies that make the equipment drug developers need to discover and manufacture drugs. “This means you get companies that grow more consistently over time, and they have less R&D and development risk,” Aeta says. “When the COVID-19 pandemic vaccines were in development, people were debating which vaccine would be successful, but you don’t need to worry about that if you’re invested in companies that provide the broad array of tools and services needed to make those vaccines.” The final bucket includes companies that deliver services, which includes everything from urgent care and dialysis clinics to private hospitals in the US and telemedicine companies. These benefit from broad sector growth and healthcare volumes as the population ages and more people need to see

about 13% of the benchmark, it only represents about 1% in Canada*. “When we built this product, it was to close the [home bias] gap, as Canadians don’t have as much healthcare exposure as we think is prudent,” Needham says. “We do this in a way that is more palatable to the investor in terms of volatility.” TDOC is Canadian-domiciled and listed on the TSX, meaning investors can trade in local currency and not have to worry about estate taxes or foreign income tax. It features a globally diversified portfolio of 150-plus holdings at a 0.35% management fee. With the healthcare sector trading at approximately 17 times forward earnings compared to the S&P, which is trading at roughly 22 times forward earnings*, Aeta argues that the long-term prospects of the sector should not get lost among pandemic-dominated analysis.

“In the short term, some investors believe there are more opportunities in reopening trades that benefit from the economy bouncing back,” he says. “But once the reopening trade is over, I’m confident, given a multiyear horizon, that healthcare has a great chance to outperform.” The message to advisors: Don’t miss the forest for the trees and consider having exposure that is reflective of the global weight of the sector. And while there are opportunities in the short term for sub-industries to outperform or underperform, for most investors, the important thing is to consider having exposure to long-term, broad-based sector growth. * TD Asset Management, data as of July 31, 2021 The information contained herein has been provided by TD Asset Management Inc. and is for information purposes only. The information has been drawn from sources believed to be reliable. The information does not provide financial, legal, tax or investment advice. Particular investment, tax, or trading strategies should be evaluated relative to each individual’s objectives and risk tolerance. Certain statements in this document may contain forward-looking statements (“FLS”) that are predictive in nature and may include words such as “expects”, “anticipates”, “intends”, “believes”, “estimates” and similar forward-looking expressions or negative versions thereof. FLS are based on current expectations and projections about future general economic, political and relevant market factors, such as interest and foreign exchange rates, equity and capital markets, the general business environment, assuming no changes to tax or other laws or government regulation or catastrophic events. Expectations and projections about future events are inherently subject to risks and uncertainties, which may be unforeseeable. Such expectations and projections may be incorrect in the future. FLS are not guarantees of future performance. Actual events could differ materially from those expressed or implied in any FLS. A number of important factors including those factors set out above can contribute to these digressions. You should avoid placing any reliance on FLS. Commissions, management fees and expenses all may be associated with investments in ETFs. Please read the prospectus and ETF Facts before investing. ETFs are not guaranteed, their values change frequently and past performance may not be repeated. ETF units are bought and sold at market price on a stock exchange and brokerage commissions will reduce returns. The TD Global Healthcare Leaders Index ETF (“TD ETF”) is not sponsored, promoted, sold or supported in any other manner by Solactive AG nor does Solactive AG offer any express or implicit guarantee or assurance either with regard to the results of using the Solactive Global Healthcare Leaders Index (CA NTR) (“Index”) and/or any trade mark(s) associated with the Index or the price of the Index at any time or in any other respect. The Index is calculated and published by Solactive AG. Solactive AG uses its best efforts to ensure that the Index is calculated correctly. Irrespective of its obligations towards TDAM, Solactive AG has no obligation to point out errors in the Index to third parties including but not limited to investors and/or financial intermediaries of the TD ETF. Neither publication of the Index by Solactive AG nor the licensing of the Index or any trade mark(s) associated with the Index for the purpose of use in connection with the TD ETF constitutes a recommendation by Solactive AG to invest capital in said TD ETF nor does it in any way represent an assurance or opinion of Solactive AG with regard to any investment in this TD ETF. TD ETFs are managed by TD Asset Management Inc., a wholly-owned subsidiary of The Toronto- Dominion Bank. All trademarks are the property of their respective owners. ®The TD logo and other trademarks are the property of The Toronto-Dominion Bank or its subsidiaries.

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FEATURES

ETF INNOVATION

EVENT-DRIVEN CREDIT One of the ongoing innovations in the ETF space involves incorporating strategies used in other formats to design modern investment solutions. Income is a challenge for many retirees and soon-to-be retirees in this lower-for-longer interest rate environment, and advisors are seeking out different return streams to add value to clients’ portfolios. In July, Picton Mahoney Asset Management launched the Picton Mahoney Fortified Special Situations Alternative Fund in four classes of units, including an ETF that trades on the TSX under the ticker symbol PFSS. The aim of the strategy is to provide equitylike returns with bond-like volatility through event-driven credit investing. “We’re engaged in creating thoughtful investment solutions that can add differentiating return streams and value to investor portfolios,” says Phil Mesman, partner and head of fixed income. “We’ve had a long-short

credit style and strategy that we’ve been doing for a long time, and we decided to launch special situations in a liquid alt format to provide something different for investors.” The strategy, a big category globally but not well represented in Canada, aims

through bottom-up analysis of special situations by forensically examining the financials of a company and its bond covenants. “Another example would be an upgrade trade, when a company gets upgraded from high-yield to investment-grade,” Mesman

“I do believe event-driven credit investing represents the best risk/ reward in all capital markets. Low yields that exist in fixed income are actually creating a lot of events” Phil Mesman, Picton Mahoney Asset Management to take advantage of events within the corporate bond market, such as news of a merger or acquisition, a potential early bond refinancing, or a regulatory change. Picton Mahoney’s team of experienced credit analysts aims to create alpha in the portfolio

says. “Often, that triggers a fairly sizeable capital gain appreciation. It’s a totalreturn-focused strategy composed of income and capital gain.” He believes the strategy would be a good replacement for high-yield debt within a

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WHAT ARE THE MOST POPULAR ETF SECTORS? CANADIAN EQUITY ETF AUM BY SECTOR

$10bn

$8bn

$8.98 billion

$6bn

$4bn

$3.92 billion $2bn

$3.60 billion $2.49 billion

Financials

Real estate Technology

Materials

$2.41 billion

Healthcare

$2.14 billion

$1.98 billion

Utilities

Energy

Source: NBF, Bloomberg, as of August 31, 2021

portfolio and that investors could fund the purchase from their equity allocation. The launch of this fund had been talked about within the firm for some time, and Picton Mahoney has been managing this strategy in another form – its Authentic Hedge special situations strategy – for six years with good results, providing income, downside protection and capital gains. “I do believe event-driven credit investing represents the best risk/reward in all capital markets,” Mesman says. “Low yields that exist in fixed income are actually creating a lot of events. You’re seeing more merger and arbitrage opportunities in the bonds, and you are seeing more recapitalizations, meaning companies taking out older bonds with bigger coupons and refinancing them. There’s a lot of action in the bond market on the back of low yields, so I like the opportunity, and we’ve tilted all of our portfolios towards more of the event-driven opportunities.” Amid the growth of passive investing, this provides a more forensic alternative geared toward finding unique opportunities rather

than simply benchmarking. Having an ETF option was purely demand-driven, Mesman adds. “We found a lot of our clients prefer the ETF structure just for ease of execution across the portfolios, so it’s 100% driven by what suits their business.”

CLEAN ENERGY In the battle against climate change, clean energy is front and centre as the energy industry plows millions of dollars into the pursuit of a net zero carbon future. The actively managed Dynamic Energy Evolution Fund aims to capitalize on this movement and the fact that there’s now a bigger universe of innovative companies displaying legitimate growth, definite sustainable business plans, profitability and value creation. The ETF is managed by Dynamic Funds portfolio managers Jennifer Stevenson and Frank Latshaw, who segmented the fund into three broad categories. The first consists of renewable power developers and operators,

featuring companies that Dynamic, in some cases, has held for a long time. The second bucket is what the company calls “emerging solutions,” which includes areas like hydrogen fuel cells, batteries, rooftop solar installers, inverter companies and some biofuel entities. It also includes some wind turbine and solar panel manufacturers. “It’s more of the growth part of the fund,” Latshaw says. “When we put our equity income team filter on these companies, we whittled down the universe into only those that have proven business models, a bit of a history behind them, and have customers, contracts, revenues and cash flows. We’re not investing in things that are totally speculative or business ideas that aren’t beyond the conceptual stage – the science and economics now are certainly supporting these companies.” The fund’s third bucket is what Dynamic calls “new energy innovators,” which includes rare earth mining companies and lithium businesses, for example. It also includes companies that provide financing for niche renewable power projects.

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FEATURES

ETF INNOVATION

EQUITY ETFs LEAD THE PACK CANADIAN ETF MARKET SHARE BY ASSET CATEGORY, YTD

I O

W in is

P e in

( (

t p s b “ in f s

Equity 67.8% Fixed income 24.1% Multi-asset 3.4% Crypto-asset 2%

T o a

Commodities 0.8% Currency 0.1%

Source: CETFA, Investor Economics

“Climate change isn’t a trend – meeting the net zero target, that is the new normal. From an advisor standpoint, clients deserve to be able to participate in this new focus area” Jennifer Stevenson, Dynamic Funds “We have investments in rare earths and lithium, but you can’t make the batteries without financing companies,” Stevenson says. “These companies are financing in a niche market that is too small for the Brookfields of the world. That’s exactly our core market. Are they generating the power? No. Are they generating the capital to make

the power? Yes.” While business fundamentals are paramount to company selection, the ETF’s mandate pushes responsible investing from simply being more ESG-friendly to being firmly focused on renewable energy and clean energy solutions, which in turn will enable other businesses in other sectors to be more

ESG compliant. Accomplishing the Paris Agreement’s mission to reach net zero carbon emissions by 2050 will require innovation in the renewable energy field. Dynamic’s managers pride themselves on not only holding quality companies at a reasonable price, but also being able to identify which companies will be the sector winners 10 years from now. This requires deep experience in the energy industry, as well as the ability to say no to a lot of the substandard companies jumping on green bonds. “[Climate change] isn’t a trend – meeting the net zero target, that is the new normal,” Stevenson says. “From an advisor standpoint, clients deserve to be able to participate in this new focus area of everything from personal to corporate activity.”

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M a in c

ORK

Workplace Technology

Dividend Fund

TSX Symbol (Reserved): WORK.UN

MIDDLEFIELD EXCHANGE OFFER AND CASH OPTION IF YOU OWN SECURITIES OF ANY OF THE FOLLOWING ISSUERS, YOU ARE INVITED TO EXCHANGE THOSE SECURITIES FOR UNITS OF WORKPLACE TECHNOLOGY DIVIDEND FUND - DEADLINE: PRIOR TO 5:00 P.M. (TORONTO TIME) ON OCTOBER 21, 2021 Workplace Technology Dividend Fund (the “Fund”), is offering units of the Fund to investors at a price of $10.00 per unit in exchange for the securities of any of the issuers listed here or for cash subscriptions. Prospective purchasers under the exchange option are required to deposit their exchange eligible securities prior to 5:00 p.m. (Toronto time) on October 21, 2021, in the manner described in the preliminary prospectus. The Fund’s investment objectives are to provide holders of units with: (i) stable monthly cash distributions; and (ii) enhanced long-term total return through capital appreciation of the Fund’s investment portfolio, through a diversified, actively managed portfolio comprised primarily of dividend paying securities of international issuers focused on, involved in, or that derive a significant portion of their revenue from business models that provide technologybased solutions to drive increases in workplace productivity (collectively, “Workplace Technology Issuers”). In addition, the Advisor (as defined below) will integrate environmental, social and governance considerations to complement fundamental analysis in selecting Workplace Technology Issuers it believes have sustainable competitive advantages. The initial target distribution yield for the Fund is 4% per annum based on the original subscription price (or $0.03333 per unit per month or $0.40 per unit per annum). Middlefield Capital Corporation (the “Advisor”) will provide investment management advice to the Fund. Mr. Paul Sagawa will act as a consultant to the Advisor and in such capacity will provide ongoing analysis regarding innovative technology & communications themes.

CLOUD COMPUTING ISSUERS Alphabet Inc Amazon.com Inc American Tower Corp Applied Materials Inc BCE Inc Broadcom Inc Crown Castle International Corp CyrusOne Inc Digital Realty Trust Inc Equinix Inc Facebook Inc Hewlett Packard Enterprise Co Intel Corp International Business Machines Corp Microsoft Corp

GOOGL AMZN AMT AMAT BCE AVGO CCI CONE DLR EQIX FB HPE INTC IBM MSFT

MongoDB Inc NetApp Inc Nutanix Inc NVIDIA Corp Oracle Corp QUALCOMM Inc Quebecor Inc Rogers Communications Inc SBA Communications Corp Seagate Technology Holdings PLC Shaw Communications Inc Sierra Wireless Inc TELUS Corp TELUS International CDA Inc Workday Inc

MDB NTAP NTNX NVDA ORCL QCOM QBR/B RCI/B SBAC STX SJR/B SW T TIXT WDAY

ABST T BB CBLK CHKP CSCO CYBR FFIV FTNT GSB

Juniper Networks Inc KeyW Holding Corp/The Magnet Forensics Inc NortonLifeLock Inc Okta Inc Palo Alto Networks Inc Rapid7 Inc SecureWorks Corp Splunk Inc Tenable Holdings Inc Varonis Systems Inc

JNPR KEYW MAGT NLOK OKTA PANW RPD SCWX SPLK TENB VRNS

AFRM BABA AAPL BMO BNS CM COIN COMP CRWD DOCU EBAY GPN IFC INTU LSPD

Mastercard Inc National Bank of Canada Nuvei Corp Opendoor Technologies Inc PayPal Holdings Inc Redﬁn Corp Robinhood Markets Inc Royal Bank of Canada Shopify Inc SoFi Technologies Inc Square Inc Toronto-Dominion Bank/The Virtu Financial Inc Visa Inc Zillow Group Inc Zoom Video Communications Inc

MA NA NVEI OPEN PYPL RDFN HOOD RY SHOP SOFI SQ TD VIRT V Z ZM

CYBERSECURITY ISSUERS Absolute Software Corp AT&T Inc BlackBerry Ltd Carbon Black Inc Check Point Software Technologies Ltd Cisco Systems Inc/Delaware CyberArk Software Ltd F5 Networks Inc Fortinet Inc GlobalSCAPE Inc

FINTECH ISSUERS Afﬁrm Holdings Inc Alibaba Group Holding Ltd Apple Inc Bank of Montreal Bank of Nova Scotia/The Canadian Imperial Bank of Commerce Coinbase Global Inc Compass Inc Crowdstrike Holdings Inc DocuSign Inc eBay Inc Global Payments Inc Intact Financial Corp Intuit Inc Lightspeed Commerce Inc

SOFTWARE ISSUERS

(L to R) ROB MOFFAT, Director, Investments and Portfolio Manager, NANCY THAM, Managing Director, Sales and Marketing, JEREMY BRASSEUR, Managing Director, DEAN ORRICO, President and Chief Investment Officer, ROB LAUZON, Managing Director and Deputy Chief Investment Officer, POLLY TSE, Chief Financial Officer and SHANE OBATA, Executive Director, Investments and Portfolio Manager

Altus Group Ltd/Canada Autodesk Inc Baidu Inc Celestica Inc CGI Inc Constellation Software Inc/Canada Descartes Systems Group Inc/The Docebo Inc Dye & Durham Ltd

AIF ADSK BIDU CLS GIB/A CSU DSG DCBO DND

Enghouse Systems Ltd Kinaxis Inc LifeSpeak Inc Martello Technologies Group Inc Open Text Corp Real Matters Inc salesforce.com Inc ServiceNow Inc Synopsys Inc

ENGH KXS LSPK MTLO OTEX REAL CRM NOW SNPS

To learn more about Workplace Technology Dividend Fund, speak with your financial advisor or contact us at: 1-888-890-1868 invest@middlefield.com www.middlefield.com

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

Calgary Oﬃce: 812 Memorial Drive NW Calgary, Alberta T2N 3C8

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

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SPECIAL PROMOTIONAL FEATURE

ETFs

Putting the power back into the hands of investors Horizons ETFs president and CEO Steve Hawkins tells WP how the company’s portfolio ETFs deliver a tax-efficient, all-in-one solution for investors

THE POPULARITY and volume of ETFs in Canada has been steadily rising over the past decade, but that brings with it a growing issue: How can advisors and investors pinpoint the best ETFs to incorporate into their portfolios? That’s something Horizons has been working hard to provide a solution to with its one-ticket portfolio ETFs, which buy other ETFs as part of an asset allocation strategy. “Back in 2018, we saw the rapid growth in the self-directed investor market and realized there needed to be an easier option for investors looking for an all-in-one solution with the tax efficiencies that our Horizons TRI ETFs offer,” says Steve Hawkins, president and CEO of Horizons ETFs. “While we weren’t the first in the world to launch a portfolio-style ETF, we did lead the charge on doing so with higher equity allocations like a 70/30 balanced fund – a move that is being copied more and more as others have begun to see the traditional 60/40 allocation as increasingly antiquated.” Horizons offers a suite of three core portfolio ETFs: the Horizons Growth TRI

ETF Portfolio (HGRO), Horizons Balanced TRI ETF Portfolio (HBAL) and Horizons Conservative TRI ETF Portfolio (HCON), each of which tweaks the equity/fixed income ratio to cater to different levels of investor risk tolerance.

itional balanced funds and ETFs – structural choices that have contributed to the success of these funds so far. And lastly, our ETFs have no top-line management fees or operating costs associated with them, and the investor is only paying the indirect manage-

“Accessibility has always been one of our core pillars at Horizons ETFs. We want all Canadians to have access to invest the way they want to” Steve Hawkins, Horizons ETFs Hawkins says there are several factors that set Horizons’ portfolio ETFs apart from the competition, including “their investment in the Horizons Total Return Index ETFs – ETFs with a unique structure that offer certain tax efficiencies when held in non-registered accounts. Also, our portfolio ETFs offer comparatively higher equity allocations compared to more trad-

ment fees of the underlying Horizons ETFs held in the portfolios.” One standout element of the rise of portfolio ETFs is the sense of true democratization of investing – something that is highly important at Horizons, Hawkins says. “Accessibility has always been one of our core pillars at Horizons ETFs,” he explains. “We want all Canadians to have access to

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PERFORMANCE OF HORIZONS’ PORTFOLIO ETFs Horizons Conservative TRI ETF Portfolio

30%

Horizons Balanced TRI ETF Portfolio

Horizons Growth TRI ETF Portfolio 27.25%

25% 22.04% 20%

18.27%

18.18% 15.97%

15% 11.99%

11.71% 10%

8.70% 4.72%

5% 1.24% 1.86%

5.78%

7.10%

12.54%

12.36%

12.43%

10.63%

10.46% 7.93%

2.70%

1 month

3 months

6 months

YTD

1 year

3 years

Since inception

The indicated rates of return are the historical annual compounded total returns, including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. The rates of return above are not indicative of future returns. ETFs are not guaranteed, their values change frequently, and past performance may not be repeated. Source: Bloomberg, as at August 31, 2021

invest the way they want to. Our aim is to provide investors of all experience levels with a broad, diversified range of investment tools to meet their portfolio objectives in a variety of market conditions. These ETFs are built for investors and advisors looking to achieve efficient, instantaneous global exposure. A decade ago, mutual funds that offered similar exposures carried comparatively higher MERs and were not accessible to self-directed investors. Portfolio ETFs put the power back into the hands of investors.” As part of this drive for accessibility, Horizons has gone the extra mile to ensure that the funds help alleviate some of the obstacles investors might face – including the dilemma of having too many ETF options. “There are a lot of self-directed investors who are overwhelmed by the sheer quantity of ETFs,” Hawkins says. “There are

approximately 1,000 ETFs currently available in Canada. Investors might not have the time to research each fund or are inundated by information. Our portfolio ETFs make it easier to build a core portfolio position. Horizons’ portfolio ETFs are designed to make getting diversification easy. “In addition, the unique tax-efficient structure of the underlying Horizons TRI ETFs means the underlying ETFs are not expected to make regular taxable distributions of income and dividends; instead, this value is reflected in the share price of the Horizons TRI ETF. Any capital appreciation is generally only taxed when the shares of the ETF are sold, helping manage tax exposure in non-registered accounts. The global exposure provided by the underlying ETFs helps tackle the typical issue of Canadian investors’ home bias to our domestic market,

which can limit their upside potential.” The portfolio ETFs’ performance to date has seen very little limit on potential – and Hawkins is equally optimistic about their future. “We are very proud of how our portfolio ETFs have performed since their inception,” he says. “Throughout the COVID-19 pandemic and its volatility, our portfolio ETFs have delivered strong returns appropriate to their respective investment approach. We believe the comparatively higher equity allocations, as compared to more traditional portfolio ETFs, have enhanced their value during this time. Of course, there are always risks posed by a downside in equity markets for an overweight equity exposure, but on the whole, I believe that how our ETFs were designed will continue to be a net benefit for these ETFs.”

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SPECIAL REPORT

2021

WEALTH TECH PROVIDERS Advisors name the best providers of financial planning software, CRM systems, back-office support and more

CONTENTS

PAGE

Feature article ............................................................ 38 Methodology .............................................................. 39 5-Star Award winners ................................................ 41 Profiles ........................................................................ 42

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SPECIAL REPORT

5-STAR AWARDS: WEALTH TECH PROVIDERS

TAKING TECH TO THE NEXT LEVEL TECHNOLOGY has become a critical component of advisors’ day-to-day lives – but with so many tech options on the market, how can advisors be sure they’re selecting a platform or product that will truly elevate their practice? To discover the tech pioneers who are truly shaping industry innovation, Wealth Professional reached out to readers across the country, asking them to name the vendors they rely on for financial planning tools, CRM,

“Never before could you model out in seconds the impact of those ‘what if’ events to your short- and long-term financial picture” Mark Evans, Conquest Planning

WEALTHTECH BY THE NUMBERS

26.6%

Compound annual growth rate of the wealthtech sector since 2017

330

Number of wealthtech deals globally in the first half of 2021

85%

Percentage of deals above $50 million in H1 2021

$2.4 billion

Amount raised in the largest wealthtech deal of 2021, by the trading app Robinhood

71.5%

Proportion of deals in the personal finance and online banking subsectors in H1 2021

14.3%

Proportion of deals in the advisory/brokerage and robo-advisory subsectors in H1 2021 Source: FinTech Global

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back-office support, portfolio management and digital marketing. Financial planning software is obviously a key consideration for advisors – and convenience and ease of use are prime selling points. Those are two factors that are front and centre at Planworth, a Toronto-based B2B SaaS platform that caters to investment advisors and wealth professionals. “Our technology and user interface make it easy for advisors to customize wealth plans, identify solutions, automatically update plans and pull live client data,” says Planworth co-founder Tarsem Basraon. “We allow advisors to seamlessly move up and down the wealth complexity curve, including the ability to handle complex corporate structures.” The ability to simplify the bigger picture for clients is also critical. Pawel Brzeminski, founder and CEO of Snap Projections, says his company’s software “[enables] an advisor to show clients their whole financial life on one page. Our Planning Page saves time, increases confidence in the assumptions and

calculations, and boosts clients’ ownership of their financial plan, making it easier for clients to implement and follow to their plan. As a result, satisfied clients refer their family and friends, which organically brings new business to the advisor.” To make their software even more useful to advisors, some tech providers have begun incorporating artificial intelligence. Mark Evans, president and CEO of Conquest Planning, highlights the benefits of his company’s AI-powered Strategic Advice Manager (SAM). “Not only does SAM enable users to navigate with ease, regardless of their technical skill set, but SAM also optimizes the ability to serve up the next best strategy to accomplish the client’s goals,” Evans says. “This human-centred, tech-enabled experience has dramatically

backbone of their practice is in safe hands while they’re busy interacting with clients. An integral way that wealthtech can support this, according to Paul Petersen, vice-president and general manager of CRM provider GoldMine, is with “a focus on the individuals and their interactions and a focus on the user’s productivity to remember the things they want to, but can’t always.” Yet the task of honing such support can only be achieved through constant tweaks, based both on organizations’ inner changes and feedback from clients. At Conquest, Evans says, “we collect significant feedback from our customers and users, and continually hone the platform while incorporating that feedback. This approach has allowed us to dream big and remain diverse

“An advisor [can] show clients their whole financial life on one page” Pawel Brzeminski, Snap Projections

increased adoption and allowed for more people to be well planned for their futures.” It’s this human touch, Evans says, that enables wealthtech to help advisors deliver the kind of true engagement clients want. And, he adds, it can also provide perhaps the most human necessity of all: peace of mind. “Everyone has fears around ‘what ifs’ in life,” he says. “Never before could you model out in seconds the impact of those events to your short- and long-term financial picture – like ‘what if the market crashes’ or ‘what if my partner passes too soon.’ Our modelling functionality helps our clients sleep at night by addressing those ‘what ifs.’”

Listening to advisors Peace of mind is equally important to advisors, who want to know that the administrative

in our perspective in meeting the needs of the market. It’s allowed us to take firms from dreaming to doing, and to gain a dominant foothold in the market incredibly quickly.” Planworth also puts a high priority on incorporating user feedback – especially over the course of the past year, when digital transformation has been in the spotlight like never before. “User feedback drives success for Planworth,” Basraon says. “We constantly engage with users for feedback on their experience with new and existing functionality to ensure development addresses what they are looking for. Planworth’s culture has been so important over this difficult time. Our team has stayed engaged and focused throughout the pandemic, and their commitment allowed us to push innovation and

METHODOLOGY To discover the best providers of wealth technology in Canada, Wealth Professional reached out to its network of thousands of advisors across the country. Beginning in midJuly, WP asked advisors to name the best wealth tech options across six categories: • financial planning software • financial planning tools/dashboards • portfolio management • CRM • digital marketing • back-office support After reviewing all the entries, the Wealth Professional team whittled down the list to the 26 wealth tech providers that received the best scores from advisors.

23% of the 5-Star Wealth Tech Providers offer financial planning software

35% specialize in portfolio management tools

23% provide back-office management

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SPECIAL REPORT

5-STAR AWARDS: WEALTH TECH PROVIDERS

advisors for its approach to portfolio management. As Rosen explains, this stems from the fact that “d1g1t is much more than just a reporting solution – d1g1t is a single platform to manage clients, portfolios and the entire business. It is used by every member of the firm. A crucial differentiator is given by our on-demand institutional-grade analytics and risk management tools, covering all asset classes, including PE and alternatives. “Thus, the d1g1t advisor platform provides advisors with all the information they need at their fingertips, allowing them to take the conversations with their clients to a different level. The d1g1t white-labelled investor portal and mobile app further provide their clients with 24/7 access to their portfolios and plans. It’s all about delivering full transparency, elevating the client’s experience and increasing engagement.”

WEALTHTECH INVESTMENT ON THE RISE GLOBAL WEALTHTECH INVESTMENT

2017

$6.0 billion 2018

$7.8 billion 2019

$7.9 billion 2020

$9.2 billion

Looking to the future H1 2021

$13.7 billion Source: FinTech Global; all figures in US$

“It’s all about delivering full transparency, elevating the client’s experience and increasing engagement” Dan Rosen, d1g1t development during this time.” The value of teamwork is also a defining factor for d1g1t, a Toronto-based digital wealth management platform. Co-founder and CEO Dan Rosen can’t praise the work of his crew highly enough. “In the end, I truly think it’s all about the team,” he says. “Our team has the unique ability

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to partner and work in close collaboration with our clients to understand their business and what sets them apart. From this, we built an advisor platform that scales up those highvalue human services that advisors provide their clients and that separates them from their competition.” The company received high marks from

Technology evolves at a breakneck pace – and Brzeminski predicts that the next decade will likely see seismic changes in wealthtech. “The next decade in wealth management technology will be shaped by the needs of retirees aiming to tax-efficiently decumulate their assets,” he says. “Advisors who focus on this market segment and adopt the right technology platforms will be able to drive deeper value for their clients.” And while technology will undoubtedly play an ever greater role in advisors’ daily lives going forward, it’s the platforms that allow advisors to focus on the human element of financial planning that will continue to be the most successful. “Many in the industry have preached that technology will one day replace financial advisors,” Rosen says. “I passionately believe that human advisors will continue to be irreplaceable when it comes to helping and coaching clients and families with real emotions, as well as ever-changing needs and goals.”

WEALTH TECH PROVIDERS FINANCIAL PLANNING SOFTWARE Broadridge Conquest Planning NaviPlan by InvestCloud

PORTFOLIO MANAGEMENT C apIntel Email: info@capintel.com Website: capintel.com

Planworth

Croesus Financial Phone: 450-662-6101 Email: info@croesus.com Website: croesus.com

Snap Projections

Broadridge

Nest Wealth

d1g1t

CRM Equisoft GoldMine Maximizer CRM

Morningstar Q Wealth Partners SIACharts Univeris Wealthscope

Salentica Salesforce Financial Services Cloud

BACK-OFFICE SUPPORT gora A Phone: 855-462-4672 Email: info@agoracorp.ca Website: agoracorp.ca roesus Financial C Phone: 450-662-6101 Email: info@croesus.com Website: croesus.com Broadridge Nest Wealth

FINANCIAL TOOLS/DASHBOARDS C apIntel Email: info@capintel.com Website: capintel.com AdvisorFlow Astrella Broadridge Q Wealth Partners Wealthscope

DIGITAL MARKETING AdvisorNet Communications AdvisorFlow

PortfolioAid Univeris

Intercom SiteForward (Manulife)

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SPECIAL REPORT

5-STAR AWARDS: WEALTH TECH PROVIDERS

From left: Jeff Thorsteinson, co-founder and COO; Paul Morford, co-founder and CEO, Agora Dealer Services Holding Corp.

CROESUS FINANCIAL Phone: 450-662-6101 Email: info@croesus.com Website: croesus.com

roesus Financial understands the ever-changing demands of advisors’ daily workflow, as well as the necessity of listening to advisors and adapting to their needs. “Croesus is evolving; Croesus is investing in its evolution,” says Matthieu Cardinal, vice-president of business development and strategic partnerships. “Having a footprint in the industry in Canada for so long gives us tremendous expertise in the core portfolio system. That’s our niche, and we will continue to expand on that niche.” Founded in 1987, Croesus offers cutting-edge, easy-to-use wealth management solutions that draw on expertise and know-how to provide products and services tailored to the needs of the financial services industry. In 2019, Croesus acquired softTarget, a company that specializes in portfolio rebalancing, and is working to integrate softTarget’s flagship iBalance software with its sophisticated solutions offering. To provide an unparalleled experience, Croesus actively listens, learns from and engages with clients to develop technology solutions that are innovative, flexible and secure. Portfolio management solutions maximize efficiency, and data analysis tools allow financial services professionals to make informed decisions. “Our guiding philosophy is to provide the best experience possible to wealth professionals by supplying the best technological tools they need to best serve their clients,” Cardinal says. “We will do everything necessary to best serve our clients and the community in general.”

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AGORA Phone: 855-462-4672 Email: info@agoracorp.ca Website: agoracorp.ca

gora has become a major industry player by offering the lowest costs, the highest service levels and the best tools. “We’ve built both a business model and a platform that’s never been seen in our space – and that’s what makes us stand out,” says co-founder and CEO Paul Morford. “We’re advisors first, so creating an advisor-centric platform that’s end-to-end was completely unique.” Launched in 2019, Agora is a business-to-business carrying dealer that works in partnership with mutual fund dealers and financial advisors, providing advanced digital tools and high-networth account and portfolio capabilities. Offering 20 model portfolio options with three portfolio managers, Agora’s accounts are 92% lower than their competitors on nominee accounts. And the company’s expertise is paying off – over the last 12 months, Agora has seen 950% growth. “We profoundly believe in advice, and our goal has always been to get meaningful advice to average Canadians,” says Jeff Thorsteinson, co-founder and COO. “What we’ve learned from advisors, the feedback as they’ve adopted the platform is, ‘You guys listen to us. When I give feedback, the next day or a week later, that feedback has been implemented into the platform.’ The comments from our advisors in the field have really helped us evolve not just our platform, but our company.”

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SPECIAL PROMOTIONAL FEATURE

TECHNOLOGY

Suites versus stacks in the battle for wealthtech supremacy The ‘bionic’ advisors of the future will operate on highly specialized wealthtech platforms. Q Wealth reveals why its platform is designed specifically for independent portfolio managers

HAVING THE right technology platform is fast becoming an all-or-nothing proposition for advisors. Do you want to truly modernize your practice, or are you content with adding to your “Franken-stack” assembly of disparate software systems? That’s the question posed by Jared Rabinowitz, executive and founding partner of Q Wealth Partners, who believes the decision is clear-cut – simply adding new software to your legacy systems actually creates more work. Instead, Q Wealth created Q-Suite – an Apple-like ecosystem that’s designed purely for portfolio managers and connects everything on a purpose-built data foundation. “There’s no integration issues because everything talks seamlessly to each other,” explains Clive Cholerton, executive partner at Q Wealth. “We’ve got the holy trinity of being able to connect the financial accounts, including account aggregation, to the financial planning engine, CRM and communications. And it’s all real-time.” Q Wealth offers a partnership for portfolio managers and independent advisors, and it believes that prospective partners, having likely already made one completely lateral

dealer change in their career, only want to move again if it will truly transform and future-proof their practice. “Only then will the effort of learning new systems and ways of working really pay dividends,” Cholerton says. As well as attracting existing portfolio managers, Q Wealth has seen an influx of MFDA and IIROC advisors who want to join the PM world.

thing to everyone. This has allowed us to craft something truly differentiated from a technology standpoint from any dealer in Canada – and, quite frankly, the world.” Advisors making the switch to Q Wealth envisage not just where their practice is today, but where they want it to be in 10 years. Rabinowitz says advisors must think more about their long-term philosophy and

“Fundamentally, we’re trying to shift the role of the advisor from being passive and reactive to being proactive and able to anticipate the needs of their client” Jared Rabinowitz, Q Wealth “Originally we thought only PMs would join us, but it seems everyone wants to get out of the SROs and into this space,” Rabinowitz says. “We help them put together the right transition plan and team to make the leap, and from there, we have the luxury of a streamlined business model where we’re not trying to be every-

make very strategic decisions. “When it comes to technology, don’t underestimate the pace or magnitude of change,” he says. “If you don’t make the right choices today, you won’t be in a position of strength if you have to make a dealer change in five years’ time to get with a firm that can

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help you compete. Meanwhile, our advisors are looking to us to elevate their practice and their client experience – to create the business structure, support environment, systems and efficiencies to grow their client base three to four times. That’s what really moves the needle on valuation. Stock in the firm only takes you so far – you have to grow your practice also.” Q Wealth’s integrated suite connects systems of record (like custodial data) to systems of engagement (like CRM and digital communications). That means advisors can take a call from a client anytime and be able to discuss whatever is on the client’s mind with everything at their fingertips – usually just one click away – in Q Central, the platform’s advisor environment. “An interactive or digital component to client experience is table stakes,” Rabinowitz says. “At this point, there’s nothing innovative about that at all. Fundamentally, we’re

trying to shift the role of the advisor from being passive and reactive to being proactive and able to anticipate the needs of their client. Only technology, beautifully architected to enhance the capabilities of a team, can accomplish that. We’ve changed the landscape with gamified elements like our client discovery systems, which help advisors uncover values and goals while using this information to build the financial plan in real time. We also believe that our financial plans are living, breathing things that are the heart of the relationship with the client.” Cholerton adds that advisors should consider whether their existing platform makes their clients’ lives better. “People think – or have been conditioned to think – their life should be about goals they want to accomplish, but that’s not what actually makes them happy. The reality is that there is only the journey, and our advisors help clients live the life they want to be living –

not just after age 65, but every single day.” To deliver on that proposition, advisors need clean, insightful data. From there, they can provide personalized touchpoints that make the client feel special. Rabinowitz says knowing your client shouldn’t be something advisors have to do to satisfy regulators, but rather a vital part in becoming the most important advisor to a family across multiple generations. The right tech platform allows advisors to do that at scale, efficiently and cost-effectively. Q Wealth also runs an advisor success department to help integrate the technology into partners’ practices. The firm understands the regulatory and compliance elements, unlike generalist outside vendors, who often try to be different things to different people in different industries and prioritize sales over actual product delivery and support. “We realized we needed to control the data, integration and interface layers end-to-end,” Rabinowitz says. “As a firm, if you don’t do that, you will always be stuck spinning your wheels and blaming your vendors for it. Advisors get tired of endless excuses. If you give them some new tech toys that don’t interact, that’s actually more work for them. They’re no longer interested in doing things piecemeal. We’re able to create technology that’s completely purpose-built. We always know the problem we’re solving for when we create the next feature – that’s a fundamental difference between us and other wealthtech providers.” The Q Wealth technology works seamlessly with the company’s department services – like marketing, the trade desk or mid-office operations. Throughout the organization, technology is aimed at enhancing workflows and the advisor/client interaction, with the ultimate goal being to optimize the staff ’s capabilities and take client experience to the next level. “We are a true 360-degree platform for advisor success,” Rabinowitz says, “and these are still early days.”

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DECEMBER 7, 2021 | ONLINE The world of finance is undergoing a metamorphosis – and Wealth Professional’s fourth annual Women in Wealth Management Canada is ready to usher in this new era with diverse leaders, innovators and trailblazers coming together to discuss what it takes to lead the way forward and redefine the financial industry. Join us for this premier wealth management event to: ■ unpack essential skills to be more resilient in the wealth space

■ discuss innovation and what we can expect to see in the wealth sector in the next three years

■ engage in a deeper conversation around establishing a truly inclusive culture

■ speed network with the industry’s elite wealth leaders in relaxed virtual setting

■ hear strategies for supporting mental health in a remote or hybrid office

FEATURED SPEAKERS

CHERYL POUNDER

JENNIFER REYNOLDS

NEELA WHITE

KIM INGLIS

2x Olympic Gold Medalist

President & CEO

Portfolio Manager

Canadian Women’s National Ice Hockey Team

Toronto Finance International

3Macs

Financial Advisor and Associate Portfolio Manager Raymond James Ltd.

Registration is free for advisors.

GOLD SPONSORS

BRONZE SPONSORS

#WPWomenInWealth

WIWM2021 - FPManagers-SUBBED.indd Ad 9.07.indd 1 46-63_Portfolio 46

SOCIAL MEDIA SPONSOR

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10/9/2021 14/10/2021 12:09:42 5:32:56 AM PM

2 AM

FEATURES

LEADING PORTFOLIO MANAGERS

LEADING PORTFOLIO MANAGERS Eight of Canada’s top discretionary portfolio managers let Wealth Professional in on the formulas behind their success THE WORLD is navigating uncharted territory, and the investment space is no different. During last year’s pandemic-driven March madness, Canada’s top portfolio managers did what they do best: used all the tools at their disposal to shepherd their clients through a historic disruption in the markets. Protection won the day as assets were moved quickly out of the nosediving stock market and into cash; private debt and private equity proved their worth as sources of non-correlated returns. In the months following the downturn, the market rebounded rapidly off the back of unprecedented stimulus. For many investors, that opened up a whole new world of opportunity for massive gains. But if there’s one

thing the portfolio managers featured in this issue of Wealth Professional can agree on, it’s that the time for caution is far from over. On the following pages, WP takes a deep dive into the backgrounds and investing philosophies of some of Canada’s top portfolio managers. As different as they are, they’re tied together by some common threads, including an inclination toward best-in-class strategies, an eye on market risks (particularly inflation) and an emphasis on diversification. But perhaps the most vital thing these PMs share is a consummate focus on protecting their clients’ interests, which will be more crucial than ever as the industry continues to chart a course through the unknown.

LEADING PORTFOLIO MANAGERS INDEX NAME

PRACTICE

PAGE

Alexandra Horwood & Alexandra Horwood Partners Arthur Salzer

Northland Wealth Management

Chad Larson

MLD Wealth Management

Jennifer Black

Access Private Wealth

Karen Ikeda

Nicola Wealth

Matthew Evans

Westmount Wealth Group

Paul Green

Green Private Wealth Counsel

Roderick Mahrt

The Mahrt Investment Group

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Trust the process A former professional athlete, Jennifer Black now focuses her time and energy on guiding clients through a robust and well-developed wealth management process

IT WAS 2003 when Jennifer Black suffered a fateful injury. “Before I came into this industry, I was a professional tennis player,” she says. “But I got injured while competing down in the US. After that, I didn’t really know what I was going to do.” Feeling unmoored, Black returned to Canada, where her mother, Janet Baccarani, was looking for someone to work at her wealth management practice. Seeing an opportunity to take on a new challenge and work with her best friend, Black decided to make the leap. The rest, as they say, is history. Over the next 18 years, Black channelled the drive and commitment she had honed as an athlete into becoming a private wealth manager, family enterprise advisor and portfolio manager; in June, she was recognized as Portfolio/ Discretionary Manager of the Year at the 2021 Wealth Professional Awards. She also established herself as a financial planning authority for widows and widowers, an audience she focused on when she co-authored a book, Managing Alone, with Baccarani in 2013. On the business side, the two steadily grew their practice, DFS Private Wealth, into a formidable all-women boutique that catered to both widowed individuals and business owners. That changed in early 2020 when they and fellow Mandeville advisor

Doug Beck decided to merge their practices to create Access Private Wealth, which currently has about $225 million in assets under administration. “A lot of advisors try to do everything at their practice, and I think you can’t offer the highest level of service and the best portfolio management that way,” Black says. “As Janet and I looked to grow our business and

progress with a customized roadmap for future meetings, as well as ongoing monitoring. “I’ve always said that an informed client is a better investor in the long term,” Black says. “By involving clients in our in-depth planning process, we help keep them from making emotional decisions.” Black says the Access team views themselves more as capital allocators rather than

“An informed client is a better investor in the long term. By involving clients in our in-depth planning process, we help keep them from making emotional decisions” expand, we got to talking with Doug about our different strengths and areas of expertise, and we knew we’d be a good fit.” Putting together their complementary strengths and perspectives, the newly merged practice developed the Access Formula, a proprietary process that all clients go through. Its seven steps include understanding a client’s vision for their family’s wealth, developing and reviewing a base plan, optimizing it with various proven wealth strategies, and ensuring

stock pickers, modelling their approach after the world’s largest pension funds and institutional portfolios. While retail investors tend to put their investable assets in publicly traded stocks and bonds, the Access team focuses on asset allocation strategies that prominently include exposure to the private markets. “When pressed, most retail investors will tell you what they really want is higher returns with less risk,” Black says. “The only way you can even come close to having those two

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PROFILE Name: Jennifer Black Title: Private wealth manager, portfolio manager, family enterprise advisor Practice: Access Private Wealth Firm: Mandeville Private Client Location: Mississauga, ON Years in the industry: 18 Certifications: BSED, FMA, CFP, CIM, FEA

things simultaneously is through asset allocation. Our aim is to deliver that to the client in the most cost-effective way possible.” Rather than spending time prognosticating the next market move, Black says the Access team focuses on getting exposure to the highest-quality ideas and specialty asset managers on the planet. To that end, Access worked with Mandeville to launch its own

platform of internal funds in 2020, which allows clients of any portfolio size to reap the benefits of alternatives, private income and equity investments, depending on their needs and risk tolerance. That dedication to diversification proved vital in March 2020. While the equity markets declined by as much as 37.5%, Black says her clients’ portfolios took lighter hits,

ranging from 6% to 10% – a strong testament to the volatility-dampening potential of private investments. “When my mother and I first joined the Mandeville platform five years ago, private investments were fairly new in Canada,” Black says. “It’s become a bit more of a widespread opportunity that other firms are also taking advantage of. But I don’t think it’s trickled down to Canadian investors as much as it really should … if you take your time and do your due diligence, there’s lots of opportunities to explore.” Aside from its focus on alternatives, Black attributes the practice’s success through COVID-19 to its ability to adapt. Even as everyone transitioned to a work-from-home setup, the Access team didn’t miss a beat in answering calls to the office. They were also able to hold consistent Zoom meetings with clients, which were instrumental in providing much-needed reassurance. “When our clients are feeling anxious, we really try to take them back to their plan,” Black says. “We remind them: What is it that we needed to accomplish? Why are we invested? What’s our timeline for this investment? So even in difficult markets, we have something for our clients to anchor themselves to and make sure they stay invested.”

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Dance to the market’s music Rather than relying on a macro theory of everything, Chad Larson listens to the different songs of the markets and picks up on cues to lean into opportunities

PROFILE Name: Chad Larson Title: Portfolio manager, senior vicepresident Practice: MLD Wealth Management Firm: Canaccord Genuity Wealth Management Location: Calgary, AB Years in the industry: 19 Certifications: CIM, FCSI

WHEN ASKED to describe his approach to market analysis, Chad Larson puts it in a vividly simple way that captures his background in both economics and psychology. “We’re always dancing to three different songs at the same time,” he says. “When building a general consensus viewpoint, I try to construct, at minimum, three-, six- and 12-month outlooks, which I try to line up with one-, three- and five-year views of the economic cycle. We listen for the intro, the chorus and basically any cues that would tell us tactically when we can lean into opportunities and when we have to back away from risk.”

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While some investors might be compelled to search for one macro outlook to rule them all, Larson takes the view that the sheer number of variables at play at any given second makes accurately forecasting the future of global events an impossible exercise. Instead, he applies his three-song philosophy in managing portfolios at his multi-family office practice, MLD Wealth Management, which recently grew its AUM to $850 million while paring back its client base to 300 families. “I’ve never believed in account minimums, but at our current level, we do have to look at relationship minimums,” Larson says, explaining how the practice transitioned 150 families to new advisors while onboarding 12 families who are higher on the wealth spectrum. “We typically work with successful private business owners, executives, professionals and other clients with busy lives who are aligned to our core principles and see value in having a holistic wealth firm guide them through their financial journey.” From an investment management standpoint, generating portfolio returns hasn’t been too difficult amid the swell of the past 18 months. In the short term, Larson says, the stock market moves on the duelling sentiments of fear and greed. That means that in addition to identifying sectors to be bullish on in portfolio construction, he and his team perform technical analysis to see where fund flows are going and what institutional money flows look like to ensure that they’re paddling with the market as they trade sector positions. “My clients don’t need to be wild contrarians,” Larson says. “They don’t need to be the rightest person in the market. They need to navigate the capital market and earn their fair share of return that’s in line with their longterm family goals.” While affluent clients in or near retirement might be inclined to look for high-quality

companies with deep value and reasonable valuations, Larson emphasizes the importance of paying attention to thematic trends and reacting appropriately. Informed by the medium-term music of corporate results, the portfolios at MLD have reaped incredible returns on single securities within the healthcare and technology spaces that would never have registered on the screens of deep value-oriented investors. “If you look at Shopify, Constellation Software, Converge Technology Solutions, Apple, Microsoft, Google – none of them made sense,” Larson says. “But if you weren’t invested in the technology stack, it was impos-

liquidity and defence, his practice has also raised a lot of cash from that bucket amid historically challenged markets. With stock valuations through the roof and bond yields at record lows, investors are pouring into the high-yield space, though Larson believes they’re overpaying and not appreciating the risks they’re taking on, given where the world is according to the long-term-focused song of the economy. “I’ve seen a lot of people start gravitating down the quality scale in searching for return,” he says. “There’s potentially a lot of risk in the high-yield market right now because the economy is reopening, but it’s not fixed.”

“My clients don’t need to be wild contrarians. They don’t need to be the rightest person in the market. They need to navigate the capital market and earn their fair share of return” sible to achieve even index-level returns, because we now have a scenario where the FAANG stocks represent 24% of the S&P 500, and the S&P is 52% of the global economy. So when we see a momentum and growth market developing, we think you have to bifurcate from your principles and say, ‘I want to paddle with this.’” Touching on his asset outlook, Larson says he understands the general hesitation to hold cash, as it rots in the face of inflation, whether it’s transitory or not. But he also emphasizes its role in providing the liquidity and flexibility needed to take advantage of opportunities. Just having come off a banner year, he says cash weightings in his practice’s portfolios are very high at the moment. While Larson recognizes the need to own some fixed income as a prudent source of

Outside of traditional investments, Larson’s practice is looking more at the mid-market lending space, where the banks are not participating, which has allowed MLD to call better terms and find great companies. From a sector perspective, he sees a promising medium- and long-term outlook for sectors that are coming into their own, such as e-sports, online gambling, plant-based proteins and digital assets, along with some tried-and-true industries. “We are entering phase three of the economic cycle, which bodes well for a resource-rich index like the TSX,” Larson says. “Precious metals have kind of taken a pause here, while energy has been the star this year. Along with copper, we believe those subsectors should prove to be very valuable through this phase of the economic cycle.”

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Be a curator of opportunity By seeking protective diversification and scrutinizing investment opportunities, Alexandra Horwood and her team have steered clients’ assets well WHETHER BY nature or nurture, Alexandra Horwood has a well-developed aptitude for wealth management. As the daughter of two respected industry veterans, John and Rebecca Horwood, she received excellent guidance, advice and mentorship from a young age. After graduating with honours from the University of Waterloo and studying at Macquarie University in Australia, Horwood joined the family business in 2010 and quickly rose through the ranks. Not one to simply ride on others’ coattails, she started her own practice, Alexandra Horwood & Partners, five years later. By the end of 2018, Horwood had managed to push her practice to the $242 million AUM mark. The 15% growth her business saw that year was a significant achievement, especially considering that she gave birth to her second child the same year. “I am constantly being challenged by the lifestyle of a busy, entrepreneurial working mother of a three- and four-year-old, which I am feeling is much harder than managing a half-billion-dollar business,” Horwood says. Since then, her practice has continued to flourish, even in the face of adversity. Horwood has consistently been named among Wealth Professional’s Top 50 Advisors,

making her fifth straight appearance on the annual list at the beginning of 2021. “We have continued an upward growth trend and nearly doubled the business in the past two years,” she says. The first quarter of 2020 brought a significant test for investors and advisors. Rocked by the initial impact of a once-in-a-century

with the proper technical support,” Horwood says, adding that her clients’ balanced and diversified portfolios put them in prime position to participate in the subsequent recovery of the market. “Stay calm, stay invested” is how Horwood describes the philosophy she adopts in managing her clients’ portfolios. “Try to

“We do not pursue ‘flavour of the day’ investing. We love investing in great companies that are well managed, disruptive, forward-thinking and generate substantial cash for investors” pandemic, North American equity markets saw a peak-to-trough decline of roughly 30% during February and March. At the same time, wealth management firms saw significant disruption as social distancing and public safety measures put an abrupt halt to in-person activities. “We survived the global pandemic and kept our valued clients invested, while mobilizing our team to work from home quickly

avoid watching the news, which is inherently negative, and be a contrarian by investing in market downturns to maximize participation in the recovery.” That patient investing philosophy helped Horwood and her team steer their clients’ assets toward growth in 2020, and 2021 has been a fantastic year. That success has contributed to significant growth in the practice, which had north of $450 million in

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PROFILE Name: Alexandra Horwood Title: Director, wealth management; portfolio manager; investment advisor Practice: Alexandra Horwood & Partners Firm: Richardson Wealth Location: Toronto, ON Years in the industry: 11 Certifications: CIM

AUM at the end of August. While being conservative is certainly a key pillar of the team’s investing approach, that doesn’t mean they don’t keep promising investments on their radar. Over the past five years, Horwood says her practice has successfully gotten in on many highly soughtafter pre-IPO opportunities in areas such as high-impact investments, ESG, climate technology projects and the future of food. “We do not pursue ‘flavour of the day’ investing,” she says. “We love investing in great companies that are well managed, disruptive,

forward-thinking and generate substantial cash for investors.” As hard-hit as the global economy has been over the past year and a half, that hasn’t stopped certain pockets of the investment world from surging, including SPACs, non-fungible tokens and cryptocurrency. While those opportunities might have a place in the strategies of more aggressive traders or speculators, Horwood approaches them with caution, as some might prove either too hot to be sustainable or too good to be true. “Trendy sectors should be carefully

researched and accessed in a conservative manner,” she says. “For example, one of my clients recently lost hundreds of thousands of dollars in a cryptocurrency scam that was not shared with me, which would have allowed us an opportunity to discuss.” Certain clients might feel it’s within their right to have an ‘unadvised’ sleeve of money to make exciting bets with as they see fit. But Horwood stresses that bringing up prospective investments with their wealth manager gives clients the chance to be informed by careful research and proper due diligence, as well as to discuss their financial goals and risk tolerance to measure whether the investments are suitable for them. As a full-service wealth practice, Horwood and her team are able to provide value that goes beyond investment management. The team’s tax planning services help clients ensure more of their investment income goes toward building their wealth and estate. They also offer enormous peace of mind to clients by ensuring their estate planning – including wills, powers of attorney, tax filings and charitable giving – is properly updated, with regular progress reviews. “It’s all about being as efficient, organized, proactive and thoughtful as possible,” Horwood says.

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Find strength in balance At Matthew Evans’ wealth practice, effective portfolio management means considering complementary perspectives and having skin in the game

PROFILE Name: Matthew Evans Title: Portfolio manager Practice: Westmount Wealth Group Firm: iA Private Wealth Location: Vancouver, BC Years in the industry: 14 Certifications: CFP, CIM

SOME PEOPLE say that succeeding in life means making mistakes before they count. In a way, that’s what Matthew Evans was able to do. “When I turned 19, my father gave me a small sum of money and told me to invest in an online brokerage account, which I did,” Evans says. “I subscribed to an investor newsletter and started investing. Before long, that money had increased three times over.” Evans’ early success led him to continue to make trades, and very quickly, he lost almost everything in the account. Looking back, Evans knows his initial gains were the result of luck, not skill. Having realized how little he knew about investing and

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not wanting to repeat his past mistakes, he decided to sign up for formal training and an education in finance. “Everyone thinks they are intelligent in a rising market – but that can change very quickly,” he says. “I thought, ‘There must be a better way to do this,’ so I decided to learn the mechanics of it all.” Three years later, he completed a program in financial management with a specialization in financial planning. Credentials in hand, he landed a job as an advisor at one of the big Canadian banks. It wasn’t long before he moved to an independent firm as an investment advisor assistant, then to another firm as an associate investment advisor. It was during this time that he met Lorenzo Pederzani and a partnership was born. “We were working out of the same office in Vancouver, and I got to helping him with a lot of portfolio construction,” Evans says. “We decided to partner together, as we realized we had a complementary mix of skills.” Today, Evans and Pederzani work as a portfolio management duo at their own practice, Westmount Wealth Group. Thanks to acquisitions and organic growth, their business currently has around $200 million in AUM from a mass affluent base, with an average account size of $700,000. To boost efficiency, the practice relies heavily on the systematized use of disciplined model portfolios that follow an endowment or pension style of investing. The fact that Evans and Pederzani have quite different personalities helps to not only build a stronger practice, but also to improve the investment selection process. “We feel there is a lot of value generated by having two minds vying to have investments included in our models, as opposed to just one,” Evans says. As top-down asset allocators, Evans and Pederzani try to get cheap beta exposure to

the public markets and diversify into alternative and private investments to improve risk-adjusted returns for their clients. “I strongly believe in alternative assets,” Evans says. “Pension plans, endowments and the ultra-high-net-worth don’t solely invest in public markets. They trade away part of their liquidity – or their ability to sell their investments on a daily basis – for a premium. I believe the retail client should be doing the same thing with a 10% to 30% exposure to infrastructure, private real estate, private equity and other types

coaching, especially in times of market stress. In the aftermath of last year’s COVID-driven downturn, he and his colleagues had to take that to a whole new level. “Initially, we were calling all our clients individually,” he says. “But because we work with around 200 households and were having the same conversation, a one-to-one conversation was going to take us about a month to implement across our whole practice. As a result, we decided to do a one-tomany approach in the form of a webinar, and we’ve been doing that monthly as a way

“We’re paying the exact same fees as our clients; we’re invested in the same models they are. I think you have to believe in what you do, and this is just another way of expressing that” of non-correlated assets, while still keeping liquidity in mind to manage long-tail risks of a systemic event.” Finding that balance between liquidity and a long-term premium is particularly important for clients at or approaching retirement, Evans says. Focusing on the conservative end of longevity assump tions laid out by FP Canada, Westmount Wealth Group’s financial plans assume that a client will live to be 95 years old. That means an individual who retires at 65 has three decades to navigate interconnected priorities and goals like addressing living expenses, not outliving their nest egg and possibly leaving a legacy through inheritance or philanthropy. Beyond asset management, Evans believes investing for clients requires behavioural

to communicate efficiently with our whole client base.” Currently, Evans and Pederzani are focused on just 14 investments, each of which they know intimately. To account for different investor risk profiles and objectives, they give their clients exposure to a different mix of the underlying assets by putting them in the appropriate model portfolio. And to ensure their interests are aligned with their clients’, they also invest in the same models. “We strongly believe that when we advise a client to invest or not invest in something, we should be doing the same thing,” Evans says. “We’re paying the exact same fees as our clients; we’re invested in the same models as they are. I think you have to believe in what you do, and this is just another way of expressing that.”

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Pivot toward the future With more than 30 years of industry experience behind him, Roderick Mahrt knew when it was time to move to where wealth management is going AS A VETERAN of the investment industry, Roderick Mahrt has plenty of milestones to look back on over the course of his 37-year career. “I got my start in the industry in 1984 when I joined a small Western Canadian regional firm,” he says. “After a year or so, I was offered a position at a national fullservice brokerage, which at that time was considered the big firm in Canada. Shortly after that, it was acquired by one of the Big Six banks, and that’s where I was for the majority of my career.” That acquisition, Mahrt says, was part of a broader trend where the Big Six each snapped up a full-service brokerage. For decades, bank-owned brokerages were able to maintain their independent spirit, but in the last 10 years, Mahrt realized the firm was becoming too tightly entangled with the bank’s business. “I’ve always felt that bankers and brokers make strange bedfellows,” he says. “There was an increasing focus on recommending bankowned products, which was like Henry Ford saying his customers could have any colour car they wanted as long as it was black.” Three years ago, Mahrt reached his breaking point. Feeling that there were too many limitations on the products he could

recommend to clients, Mahrt decided he wanted to join a firm that supported more independent thinking. “I moved over to Wellington-Altus in September 2018, which was a significant pivot after 30 years of being at a big bank,” he says. “The firm was built by advisors, and I could run my practice with better technology and fewer constraints. As a fiduciary, it’s been

decision is made to the benefit of the client. Another key piece, he says, is a strict process orientation for the management and administration of clients’ investments. In addition to conducting a comprehensive onboarding that examines every component of a client’s affairs, the Mahrt Investment Group also ensures each client has a highly personalized investment policy statement.

“[Wellington-Altus] was built by advisors, and I could run my practice with better technology and fewer constraints. As a fiduciary, it’s been one of the best moves I’ve ever made” one of the best moves I’ve ever made with regards to looking after our clients.” With nearly $500 million in AUM, the Mahrt Investment Group caters to institutional clients from charities and foundations to operating and holding companies, as well as business owners and high-net-worth families in the $5 million to $10 million range. A cornerstone of the practice’s approach is a “family first” philosophy that ensures every

“We view the investment policy statement as the constitution that governs how we will manage each client’s investments,” Mahrt says. “It helps us fulfill our fiduciary duty, and it serves as a kind of control mechanism. Everything we do is monitored by a chief portfolio management committee that ensures our decisions are in adherence with the policy statement.” Along with stating clients’ objectives, the

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PROFILE Name: Roderick Mahrt Title: Executive vice-president, senior portfolio manager Practice: The Mahrt Investment Group Firm: Wellington-Altus Private Wealth Location: Victoria, BC Years in the industry: 37 Certifications: FCSI, CIM

investment policy statements also define the asset class structure of their portfolios – another area where Mahrt has made a major pivot in recent years. “A year or two ago, my associate portfolio manager, Alex, and I studied data going back 100 years to see how every single asset performed for someone who was 95 years old,” Mahrt says. “That person would have gone through the tail end of the Great Depression, the Second World War, and countless cycles of inflation and severe market shocks. We concluded that the traditional balanced strategy of 70% equities and 30% fixed income that had worked so well for the last 30 years was not going to work for the next 30. In fact, we found that it wouldn’t work for the next 10 years.” A look at many insurance companies’ and investment firms’ portfolio projections shows

just how dated their models are, he says. Bond portfolios, they project, would have a 6% yield, which is unrealistically optimistic, given that 10-year government bonds are yielding anywhere between 1.3% and 1.4% today. Factor in the eroding effects of tax and inflation, and it’s obvious how just serious the problem of retirement income security is. With that in mind, Mahrt realized his team needed to change the asset class structure in clients’ investment policy statements to go beyond traditional fixed income and equities and into alternatives such as infrastructure, real estate, commodity-trending strategies and principal-protected notes, among other things. “I had to work with our compliance and legal departments to redraft all our investment policy statements,” he says. “And then from last September until January, I called

every single client of ours to explain what we were doing and why. Once they understood, 100% of them elected to come onside.” That expanded mandate gives Mahrt more room to manoeuvre as he seeks to minimize future risks – or, as he puts it: “We have more safety nets within our portfolio structure.” Last year’s market downturn didn’t put any more stress on clients’ portfolios than any other correction would have done, Mahrt says, which was an emphatic affirmation of his team’s portfolio construction approach. But as unexpected as the pandemic was, Mahrt was more stunned by the disconnect between the global economy and the markets: As one was shutting down, the other rallied remarkably. A major driver behind that, he says, was the potent combination of monetary and fiscal stimulus unleashed by governments and central banks. “If you look back at the global financial crisis in 2008, when they were slow to lower rates and provide fiscal stimulus, it basically led to 10 years of a lot of pain in the markets,” Mahrt says. “The amount of rocket fuel added to the market last year was something I haven’t seen in all of my 30 years in the industry, and investors in general took it as a welcome surprise. But I don’t think anyone should expect that this type of growth comes free.”

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Make protection a priority Over the course of his career, Paul Green has made a point of expanding the defensive options he can apply to his clients’ portfolios FOR PAUL GREEN, being named one of Wealth Professional’s Top 50 Advisors isn’t just a point of personal pride – it’s also an opportunity to represent the little guy. “I’m quite proud of the fact that I do come from a small town, and we’ve been recognized as one of the Top 50 Advisors in Canada for the past five years,” Green says. “It’s not always big-town practices that do this job, and we’re very happy to look after so many households and families.” His practice, Green Private Wealth Counsel, works with a cross-section of clients from coast to coast, including everyone from farmers and business owners to pre-retirees and retirees. With a main office in Woodstock, Ontario, and another recently added in Burlington, Green Private Wealth Counsel currently has six advisors who represent around $425 million in assets across roughly 800 households, with the average level of invested assets falling around $600,000. “Over the past year and a half, we doubled in size in terms of assets, households and advisors – definitely not something you expect to happen in the middle of a pandemic!” Green says. His team reacted to the market downturn last year with speed, pulling quite a bit out of their equity positions and moving it into

cash. They got back into the market just as fast, taking advantage of its sharp rebound. Green and his team have been able to move quickly as discretionary portfolio managers, but that wasn’t always the case. Before 2015, they were working under a model that compelled them to work with mutual funds, which they found very limiting in terms of

“After the global financial crisis in 2008, I realized there was no way I could look clients in the eye and say I could protect them,” Green says. “I needed to be sure I could move my clients out of stocks quickly when entering into a bear market and move back in as it recovers. Honestly, I wouldn’t be doing what I’m doing if I weren’t discretionary.”

“After the global financial crisis in 2008, I realized there was no way I could look clients in the eye and say I could protect them. I needed to be sure I could move my clients out of stocks quickly when entering into a bear market and move back in as it recovers” keeping their clients protected. The issue for Green was that the vast majority of investment products, including mutual funds or wrapped programs, had restrictions that contractually obligated their managers to maintain very high exposure to the stock market. That meant if a selloff was bad enough, his clients who were placed in those products would be exposed.

Green and his team have the ability to sideline their entire client base into cash as needed within as little as an hour to get out of a declining market. He’s executed that type of trade a few times in the past, and while it creates a chance that clients don’t fully participate in spectacular rallies, says they’re generally fine with giving up some upside in favour of protection from major loss.

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PROFILE Name: Paul Green Title: Portfolio manager Practice: Green Private Wealth Counsel Firm: Harbourfront Wealth Management Location: Woodstock, ON Years in the industry: 29 Certifications: CFP, CIM

“Having that discretionary portfolio manager designation has been a valuable part of our toolbelt,” he says. “We make sure our clients benefit from a fuller range of products and also speed of execution, while of course being very mindful and careful on costs.” While Green says his clients’ portfolios have enjoyed good returns from their equity

holdings over the past 18 months, he’s not the type of manager who’s comfortable with extended bull runs and high valuations. The market has been in pretty good shape, all things considered, but he’d like to see a little more breadth; the price-to-earnings and price-to-sales ratios he’s been seeing paint a frothy picture. He also believes the market

is benefiting from a built-in stop-loss mechanism in the form of the Fed’s continued stimulus, which begs the question of what happens when it inevitably ends. “They say ‘Don’t fight the Fed,’ and we haven’t done that,” Green says. “It has been great for us, but I’m not convinced this is a gift that will keep on giving.” With that in mind, he’s been positioning portfolios in preparation for a pullback. Aside from moving some equity positions into cash, he says his team has been considering applying some long-short strategies. In the near- to mid-term, he sees positive trends in the areas of tech and digitization, as well as healthcare and consumer cyclicals. Green adds that his practice has been able to get further diversification and protection via exposure to real estate, as well as private debt and private equity, thanks to their current firm’s comprehensive platform. After moving out of bonds over the last few years, close to half of his balanced portfolio today is invested in income-generating investments like apartments, private equity and private debt. “I’m happy that the markets have done very well, but I truly believe we’re in for a very difficult back side of all this,” he says, underscoring his focus on protection. “I may be wrong, and I think that would be awesome – but I’m keeping my eyes wide open.”

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FEATURES

LEADING PORTFOLIO MANAGERS

GO-TO STRATEGY

Follow the smart money Through an elite network of institutional investors and third-party managers, Arthur Salzer helps his clients access world-leading opportunities PROFILE Name: Arthur Salzer Title: CEO and chief investment officer Practice: Northland Wealth Management Location: Oakville, ON Years in the industry: 30 Certifications: CIM, CFA

IT WAS only by happenstance that Arthur Salzer got his start in the wealth management industry. Having earned his real estate broker’s licence within days of turning 18, Salzer was well on his way to joining his family’s real estate investment business. But by the time he finished university in 1991, Ontario was going through a very deep recession, and his plans were dashed. Not quite knowing what to do, Salzer decided it would be a good time to become a registered representative, which set him on an entirely new and exciting path. At the time, he didn’t know much about private wealth management; he was just building on his university education and what he had picked up about investing. But because stocks were in the beginnings of a bull market, he decided to switch gears. In 1992, he found

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a job at a retail branch office of a Big Six bank; within two years, he was part of the bank’s private investment unit. “I spent the next eight years there, and it’s really where I got exposure to private wealth management for the first time,” Salzer says. “Since then, I’ve been a devoted student. It’s been a 30-year career, but looking back, it feels like just the blink of an eye.” Today, Salzer is the CEO and chief investment officer at Northland Wealth Management, an ultra-high-net-worth practice that caters to 35 Canadian families, including extended family members in places as far away as Europe and the Caribbean. Each family has a net worth of anywhere from $10 million to more than $100 million, making Northland’s clientele the very definition of patient capital. “The families we work with want to be successful over multiple generations,” Salzer says. “They have very long-term horizons, and they have no qualms about being in 10-year private equity-style funds.” Northland believes in maintaining a balanced 60/40 portfolio, but it’s not the equity/fixed income blend of decades past; instead, the practice aims for 60% exposure to public assets and 40% to alternatives. Through a well-heeled network of third-party managers and like-minded investors, Northland offers its clients access to the same opportunities as major Canadian pension funds. “We help our families access the same deal flow, the same managers and the same rates Canadian pensions do, so it’s a genuinely institutional approach,” Salzer says. “We understand that returns in the private investment space aren’t evenly dispersed; if you can’t access the top quartile of asset managers, we think it’s probably better to stay in the public markets.” Its philosophy of best-in-class diversification has earned Northland a reputation as

a top wealth practice. In addition to winning Advisory Team of the Year (10 Staff or More) at the Wealth Professional Awards earlier this year, it has been recognized as the Best Multi-Family Office Under $2 Billion at the 2021 Private Asset Management Awards and earned a commendation for Multi-Family Office (Up to $2.5 Billion in AUM) at the 2021 Family Wealth Report Awards. Northland’s approach also worked well for its clients during the March 2020 drawdown. While the global pandemic caused the equity markets to decline by more than 30%, Northland’s clients saw an average drawdown of around 7% on a dollar-weighted average

reckoning over these rising debt levels.” With inflation writ large in economic data over recent months, central banks could already be seeing the consequences of their unprecedented actions. While the transitoryversus-permanent debate is still raging, Salzer believes the world has come to an inflection point, and technology’s disinflationary influence over the past 30 years may be giving way to a new era of moderate price increases. “That changes your discount models and where you want to invest,” he says. “In the short to medium term, we think value stock companies like Canadian banks and resource companies in the oil and gas or mining spaces

“We help our families access the same deal flow, the same managers and the same fees Canadian pensions do, so it’s a genuinely institutional approach” basis. “We really went through it like a hot knife through butter,” Salzer says. During that period, he says, a lot of managers called in capital commitments and were able to put the money to work opportunistically by snapping up assets, businesses and real estate at bargain prices. By investing alongside large institutions, billionaire singlefamily offices and other large investors, Northland’s clientele could afford to gain even while the public markets were spiralling. “The only thing that we’re surprised at is the amount of money that’s been pumped into to the financial markets the past 18 months,” Salzer says. “It’s not good to try to paper over a problem with more fiat currency, but that’s what governments are doing right now. We do have some concerns that over the next decade, we’ll potentially have a day of

may become a lot more attractive versus what we’ve seen in the past decade.” In the alternatives space, Salzer says Northland is very interested in private real estate, including multi-family rental properties in the Southern US, as well as industrial real estate tied to the secular tailwinds of e-commerce. The firm also has an eye on secondary private equity and private debt offerings, as well as litigation financing. And despite Bitcoin’s notorious volatility, Salzer says it’s displayed some of the best returnversus-volatility characteristics of any asset class his team has seen. “We think there are still bigger opportunities not so much in altcoins, but in Bitcoin in particular,” he says. “We’re only at the initial institutionalization of Bitcoin, and there’s still a lot to come. It’s like buying Apple in 2003.”

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FEATURES

LEADING PORTFOLIO MANAGERS

GO-TO STRATEGY

Position assets for defence For decades, Karen Ikeda has focused on getting exposure to non-correlated assets to minimize portfolio volatility WITH A career that stretches back more than 25 years, Karen Ikeda is no johnnycome-lately to the wealth management industry. And like many success stories, hers is a journey of progress and passion. “I started in more of an administrative role, but I kept working myself up to be an actual advisor,” says Ikeda, a managing partner and senior wealth advisor at Nicola Wealth. “I really loved helping clients in their financial affairs and making sure they had peace of mind.” Throughout her career, Ikeda has worked with professionals such as lawyers, doctors and dentists – both retired and practicing – as well as business owners. Under the broad umbrella of providing peace of mind, she offers planning services and support for different facets of her clients’ financial picture, including wealth accumulation, philanthropy, intergenerational wealth management and corporate structuring, to name a few. “In many cases, clients don’t know what they don’t know when they come to us,” she says. “We would bring some of these issues up, and they would be very appreciative and happy with the way we would approach things.” Since its inception in 1994, Nicola Wealth has grown into a firm with $1.3 billion in assets under administration. That growth

has been driven by a strong, employeecentred culture built around collaboration, professional and personal development, and profit-sharing. “We work within and across the teams to support our organization’s shared success, and that’s really key,” Ikeda says. “I think our best work comes from partnership, not

sleeve, Nicola’s portfolios include exposure to US, Canadian and foreign stocks, as well as private equity. “Our approach has always been to have a very diversified portfolio of not just stocks and bonds,” she says. “We believe in diversification, and we believe in assets that generate cash flow.”

“Our approach has always been to have a very diversified portfolio of not just stocks and bonds … We believe in diversification, and we believe in assets that generate cash flow” silos, and we’re driven continuously to learn and improve. We’re always looking for new and better ways to serve our clients, provide thought leadership and optimize our business for the future.” Through a portfolio management lens, Ikeda says the Nicola approach emphasizes the value of a very diversified portfolio. The firm goes beyond traditional fixed income by looking at exposure to foreign bonds, private debt, high-yield bonds, mortgages, real estate and infrastructure. Within the equities

Augmenting their clients’ traditional asset exposures positioned them very well during last year’s first-quarter downturn, Ikeda says. While equities plunged by more than 30%, their average client’s portfolio was down by a modest 5%, which offers a massive psychological benefit. “When your portfolio drops 35%, you as an investor are just more prone to doing the wrong thing,” she says. “You panic, and you start selling assets when you shouldn’t. By having that diversified portfolio, we help our

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PROFILE Name: Karen Ikeda Title: Managing partner, senior wealth advisor Firm: Nicola Wealth Location: Vancouver, BC Years in the industry: 27 Certifications: CFP, CLU, CIM

clients avoid making decisions against their own interests.” While the stock market has rebounded from pandemic lows, Ikeda notes that equities are currently pushing peak valuation levels, and the market depth has been stuck at less than 5% for the past year. Anticipating these kind of risks in the public equity space, Ikeda says Nicola created a private equity portfolio three years ago to provide equitytype returns that aren’t correlated to the public markets.

And as the threat of global warming reaches critical levels, Nicola has created a sustainable innovation fund for investors who want to effect positive change. Similarly, she says the writing has been on the wall for fixed income for the past few years; with interest rates so low, yields in the bond markets have been an inadequate defence against inflation, and many investors seeking higher returns have been forced into the junk space, where the quality of issuances has been questionable at best.

“In anticipation of that, we created our own private debt fund four years ago,” Ikeda says. “We also have other offerings, like our mortgage fund and access to real estate investments, to provide sources of fixed income that aren’t so correlated to the public markets.” Looking ahead, she says the continuing uncertainty around rising inflation – whether it’s just a temporary phenomenon or one that’s more long-term – is an area of concern. But with their allocations to alternative assets, particularly real estate and private assets, her clients’ portfolios are well placed to weather the coming storm. Those private equity and debt positions do come with a liquidity trade-off, but Ikeda says her clients generally have less of a need than the average investor to move into cash quickly. Beyond that, her firm’s diversified portfolios generate cash flow that provides a healthy return cushion for clients. “Our average client generates about a 4% to 5% cash flow,” she says. “If your goal is to keep up with overall inflation of 4%, and your cash flow returns take care of that, then you’re not so reliant on expecting the equity markets to increase by leaps and bounds. Given how overvalued equities are, along with the prospect of rising interest rates, we think equity returns are set for some challenging times ahead.”

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SPECIAL PROMOTIONAL FEATURE

TECHNOLOGY

Inside the workplace tech revolution Leaders from Middlefield Capital Corporation tell WP why the workplace tech subsector presents such a compelling investment opportunity

Mark Aboud, managing director of workplace innovation and productivity, and Dean Orrico, president and CIO

WORKPLACE TECHNOLOGY is a massive area to cover – and few people know this better than Dean Orrico, president and chief investment officer of Middlefield Capital Corporation (MCC). Among MCC’s many products is the Workplace Technology Dividend Fund, an actively managed, internationally diversified portfolio of companies that develop technology-based solutions to drive increases in workplace productivity. “When people think of technology, it’s a pretty all-encompassing term,” Orrico says. “Workplace tech is a subsector within this big umbrella – tools that include software, cloud computing, all those things used within a workplace. These are tools that are designed to enhance the productivity of an individual and an organization.” As Orrico explains, there are a few reasons why workplace tech is a compelling investment sector. “Number one, we know

there’s a shortage of skilled labour, whether that’s in the goods or services industry,” he says. “Companies across the spectrum, small and large, are finding this to be a major challenge, which can be addressed, in many ways, by embracing new digital technology tools. Part and parcel of that is the need to attract and retain skilled people – so incorporating new workplace technology makes your workplace more attractive to highly sought-after employees. This issue has become more exacerbated as a result of the pandemic. “Workplace tech also has the effect of increasing productivity and reducing costs. And our view is that workplace tech is going to become even more recognized as an investment sector over the next 10 years.” So what inspired MCC to launch a fund focused on this burgeoning sector? “I was speaking with some of the companies I own in my portfolios,” Orrico remembers, “and for the last four or five years, they’ve been talking about trying to find ways to reduce their costs. They mentioned how they’ve been implementing technologies such as very sophisticated HR software management systems. So, when we’re hearing that kind of thing from our portfolio companies and the success they’ve experienced, it causes us to look more specifically at ways we can exploit that as an investor.” While many workplace tech companies

aren’t household names like, say, Facebook or Google, that’s part of the appeal, Orrico says. “While we think it’s not a completely ignored area, it’s one of these areas that people often just don’t think of. When most investors think of tech, they mention the mega-cap FAANG names, which in many ways are more associated with consumer-oriented applications. There are huge opportunities in some of these workplace tech businesses, including areas like cybersecurity and fintech. “We think this is a really compelling investment opportunity because our clients are financial advisors, and they primarily work for large institutions like the Canadian banks. They’re seeing tech being utilized in their business every day. Most of them are still working from home – and now they’re looking for tools that allow them to work from anywhere. These are the types of things that workplace tech is about.” While keeping an eye on investment opportunities in the sector, MCC has also been able to incorporate innovative workplace tech into its own practices. “If innovation is the catalyst for your future, then productivity is where you capture that and return it to shareholders or your bottom line,” says Mark Aboud, MCC’s managing director of workplace innovation and productivity. “The heart of innovation in the workplace – and really in all products today – is digital. And what you can do with digital tech is not just create better products that are more intelligent, but you can also create a work environment where employees are more engaged, have better jobs and produce better outcomes because they have better tools. “Where you have an engaged workforce, usually you need to have the tools that allow them to innovate and take your company to the next level. Wealth technology is a great focus area for a product for our customers, but also something we can adopt ourselves so that we can attract top talent. To do that, you’ve got to create an environment and culture where people come and develop, they learn, they have tools, they gain new skills, and they innovate.”

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SPECIAL REPORT

2021

ASSET MANAGERS Wealth Professional turned to advisors to find out which asset managers are delivering a winning combination of service, product range and innovation

CONTENTS

PAGE

Feature article .............................................. 66 Methodology ................................................ 67 5-Star Award winners ................................. 68 Profiles .......................................................... 69

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SPECIAL REPORT

5-STAR AWARDS: ASSET MANAGERS

THE BEST IN THE BUSINESS ASSET MANAGERS have faced no shortage of obstacles over the past 18 months. While some sectors of the market have been battered by the COVID-19 pandemic, others have soared, making the always challenging task of creating bulletproof investment products even more difficult. On top of that, asset managers also had to figure out how to maintain consistent service to advisors during a sudden shift to remote work. To discover the asset managers that have risen to these challenges to provide top-notch performance, innovation and product options, Wealth Professional reached out to advisors across Canada, asking them what’s most important when choosing an asset manager and which companies are consistently meeting their expectations.

“Our team has been with advisors by leveraging behavioural economics to help them understand how emotions are shaping investor decisions” Catherine Milum, Manulife Investment Management

When it comes to the elements that survey respondents rallied around, service provided to the advisor and investor took the top spot. On that point, Roy Ratnavel, executive vice-president and head of distribution at CI Global Asset Management, notes that the ongoing pandemic has been “the greatest

WHAT’S MOST IMPORTANT TO ADVISORS WHEN CHOOSING AN ASSET MANAGER? Service provided to the advisor/investor

92% Product performance

91% Fees

83% Innovation

82% Range of products available

81% Brand awareness

67%

recent challenge for our industry and for our society. At CI GAM, we were able to make a seamless transition to the new working environment. We have continued to provide a strong level of support to advisors and clients, as well as successfully executing on our business strategy.” A client-centric approach is also paramount at Mackenzie Investments, whose philosophy revolves around putting the investor at the centre of everything they do. “We believe strongly in the value of financial advice,” says Kristi Ashcroft, senior vicepresident and head of product at Mackenzie. “We aim to service the advisor community with market insights, high-performing products and value-add services such as tax and estate, practice management, and portfolio construction consulting.” None of this would be possible, of course, without a strong risk management framework. Sadiq Adatia, chief investment officer at BMO Global Asset Management, points to this framework as one of the main components of BMO GAM’s success. “It will continue to be key,” he says. “Our

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teams collaborate on a daily basis – including sales, operations, trading and other areas – to ensure we are delivering an exceptional experience for our clients.” During times of market turbulence, communication is also critical – and it’s something Dynamic Funds has emphasized over the past 18 months. “We have increased our communications and embraced new tools to help build confidence and peace of mind for advisors and for clients,” the company says. “We have also adapted to meet clients’ evolving portfolio needs, from diversification and risk tolerance to asset allocation and more.” In such an uncertain environment, advisors have been under a huge amount of pressure as clients reassess their financial plans. That’s made supporting advisors an even bigger priority for many asset managers, including Manulife Investment Management. “We know the pressure our advisors are under,” says Catherine Milum, head of wealth sales for Canada at Manulife. “Not only are they providing valuable advice to help investors with their financial planning goals, but we also

The power of product Service is undoubtedly important, but it’s of little use to advisors unless it underlies a robust range of products able to meet their clients’ investing needs. Ninety-one per cent of advisors said product performance is an essential quality they look for in an asset manager, and 81% said they seek a broad range of products. At Mackenzie, Ashcroft says, “our product range is continually evolving, ensuring that Canadian investors have access not only to traditional products that deliver attractive investment returns, but also to newer asset classes and investment strategies such as private credit, infrastructure, thematic environmental strategies and sustainable investing.” When designing new products, Ashcroft notes that it’s crucial to “balance innovation with tried-and-true investing disciplines. We want to be innovative in the way we think about products that will bring diversifying and return-enhancing investment exposures to client portfolios, such as Chinese equity and fixed income or private equity replication. We also want to be innovative in offering products that aim to solve for some of the key investment

“To fully understand the future of markets requires a strong understanding of clients in order to deliver the innovative tools and products required to meet their evolving needs” Sadiq Adatia, BMO Global Asset Management know they’re providing emotional support in new ways. Our team has been with them by leveraging behavioural economics to help advisors understand how emotions are shaping investor decisions. We have also continued our direct access to our portfolio managers, capital markets, and tax and estate planning.”

challenges our clients face, such as sequenceof-returns risk or inflation risk in retirement.” Likewise, CI GAM isn’t resting on its laurels when it comes to delivering a comprehensive product lineup that meets investors’ needs. “Our mandates are available in mutual funds, ETFs and private pools, allowing our

METHODOLOGY To find the best asset managers in the Canadian investment industry, Wealth Professional surveyed thousands of advisors across the country, asking them to name the asset managers they hold in the highest regard. Survey respondents rated their favourite asset managers across five categories: • service provided to the advisor/ investor • fees • innovation • range of products available • brand awareness WP also asked advisors to weigh in on which of these aspects is most important when working with an asset manager. At the end of the survey period, the Wealth Professional research team tallied the scores from all advisors, and the highest-scoring companies were named 5-Star Asset Managers for 2021.

69% of advisors said service and performance are the most important qualities in an asset manager

44% said an asset manager’s range of products is most important

42% said an asset manager’s fees are the most important factor

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SPECIAL REPORT

5-STAR AWARDS: ASSET MANAGERS

2021

ASSET MANAGERS

Dynamic Funds Phone: 800-268-8186 Email: invest@dynamic.ca Website: dynamic.ca Manulife Investment Management Website: manulifeim.ca BMO Global Asset Management CI Global Asset Management Fidelity Investments Harvest ETFs Horizons ETFs Mackenzie Investments RBC Global Asset Management

What’s coming next?

TD Asset Management

“We want to be innovative in the way we think about products that will bring diversifying and returnenhancing investment exposures to client portfolios” Kristi Ashcroft, Mackenzie Investments clients to invest in the structure they prefer,” Ratnavel says. “Additionally, we have introduced products providing access to asset classes and investment approaches that were previously restricted to large institutional investors or otherwise difficult to reach. These include

Milum says. “Then there’s longevity – we have some flagship funds approaching their 25th anniversary. Finally, there’s breadth: the ability to offer mutual funds, ETFs, segregated funds and SMAs across a wide variety of asset classes and geographies.” Manulife is also proud of the strength of its brand – a factor that wasn’t as critical to advisors as service, performance or innovation, but was still important. Sixty-seven per cent of advisors said they consider brand awareness when selecting an asset manager. “Manulife has been deeply rooted in our Canadian heritage since 1887 – so much so that one in four Canadians have a Manulife product,” Milum says. Ashcroft adds that strong branding can help succinctly communicate an asset manager’s core values to advisors and their clients. “In terms of branding, we always hope our brand reflects our purpose – to create a more invested world, together – and our commitment to offer the education, insights and products that enable good investment decisions and outcomes,” she says.

cryptocurrencies, liquid alternatives and other alternatives such as private markets.” Manulife, meanwhile, has drilled down the essence of a great product lineup into three core values. “Firstly, there’s strength and performance,”

While it’s impossible to predict the future of the markets, this year’s 5-Star Asset Managers are confident they’re well positioned to take advantage of whatever challenges and opportunities might come their way. Milum takes it as a positive sign that investors “are more aware than ever of the importance of insurance and wealth management due to the global pandemic.” And at BMO GAM, “we expect the market will continue to demand strong risk-adjusted returns with reasonable fees,” Adatia says. “We also expect the markets will continue to look for more socially aware products and/or ESG integration within the investment process. However, to fully understand the future of markets requires a strong understanding of clients in order to deliver the innovative tools and products required to meet their evolving needs – something I know we spend a lot of time thinking about.”

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DYNAMIC FUNDS Phone: 800-268-8186 Email: invest@dynamic.ca Website: dynamic.ca

ynamic Funds’ core values – and the key drivers of its success – are grounded in active management and advice. “We firmly believe that legitimately active management matters,” the company says. “We consider it to be the cornerstone of exceptional portfolio construction where it can add significant value to any investment portfolio.” Dynamic’s commitment to fostering partnerships between investors and financial advisors has been unwavering. With roots starting in Montreal in 1957, Dynamic Funds has become one of Canada’s most recognized asset management firms, offering a comprehensive range of products and services spanning every major sector, geographic region, and investment discipline. Dynamic has $65.1 billion in assets under management and has earned 52 industry awards – and counting – for its expertise. “While we don’t know the direction markets will take, what we do know is that financial markets will remain complex, and the value of active management will persist,” the company says. “Our name today is more appropriate than ever, and we expect it to continue to be in the future.”

“O

Catherine Milum, Head of Wealth Sales, Canada

MANULIFE INVESTMENT MANAGEMENT

Website: manulifeim.ca

ur approach to attain success is simple – it’s about making our customers’ decisions easier and lives better,” says Catherine Milum, Head of Wealth Sales for Canada at Manulife Investment Management. “We strive to provide more than just investment results for clients. We believe in providing advisors unparalleled access to our experts and thought leaders so that they can, in turn, deliver value for their clients. We bring this hands-on support to our partnership with advisors every step of the way.” To help create positive financial outcomes, Manulife takes a specialist approach to asset management, offering highly differentiated strategies across its areas of expertise – fixed-income, equity, balanced and multi-asset solutions. The firm offers award-winning products with on-the-ground access to portfolio managers, tax and estate planning experts, capital markets strategists, macroeconomists and support with behavioural economics. Being deeply rooted in Canadian heritage since 1887, what sets Manulife apart is the strength of its brand. Manulife Investment Management is also a one-stop shop for investment solutions with a track record of strong performance for Canadian investors. “In addition to being a leading global asset and wealth manager and a leading retail investment provider in Canada, we’re part of a diversified global financial services organization,” Milum says. “So when advisors are looking for solutions beyond investments, such as insurance, banking or group benefits and retirement, we can support those needs.”

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PEOPLE

ADVISOR PROFILE

Curiosity pays off A calculated individual with a curious nature, advisor Kate Murdoch has never shied away from facing challenges and learning lessons from others within the wealth management industry

WHEN KATE MURDOCH joined the financial services industry, it was a calculated decision. As a student at Dalhousie University, Murdoch won Scotiabank’s Atlantic Canadian university interview competition. That led to her placement in a rotational leadership program with the bank in Vancouver. “I took full advantage of that opportunity to explore all the different areas in finance,” says Murdoch, who’s now an investment advisor and financial planner with Ridd & Associates Wealth Advisory Group at BMO Nesbitt Burns. “I always saw it as putting the pieces of the puzzle together. And the more I discovered, the more I was sure that wealth management was the right fit for me.” Always mathematically adept, Murdoch was drawn by the opportunity to engage with the broader global economy and market. As she dove deeper into the industry, she found that it fit perfectly with her ethos of continuous learning. In strategic wealth planning, she saw that there were interconnected spheres of specialization – tax planning, business succession, philanthropy, family planning, insurance and more – each of which were constantly changing. “The never-ending opportunities to challenge myself, and seeing how that hard work can meaningfully improve clients’ lives, is what got me hooked on the profession,” she says. In her life and career, Murdoch has faced

various challenges, and from a young age, she learned the importance of resilience – never shying away from hurdles and approaching them with a spirit of curiosity. She’s also been able to grow by seeking out opportunities to learn from others in the industry. As she sees it, there’s much benefit to be had from lifting one’s head up, taking the blinders off and welcoming other people’s perspectives – a strategy that paid off when she received unexpected interest and generosity from some key individuals. “One person in particular has been a significant mentor and inspiration to me,” Murdoch says. “This person is well respected by their clients and in the different industries we impact. Even though they prefer to keep a low profile, they take care to do things right, supporting all their actions with in-depth knowledge and experience.” That’s the philosophy Murdoch strives to apply, too. Aligned with her calculated approach, she takes care to keep her prac-

tice’s client numbers at a level that allows for a high standard of service and attention. They focus on high-net-worth clients – including many business owners, multigenerational families and single individuals – who typically have complex wealth planning needs and opportunities. For her own clients, Murdoch takes a very customized and detailed approach. Looking at every individual’s situation and needs, she draws on her extensive knowledge and experience to formulate recommendations, which she strengthens by consulting with other specialized experts. “We believe our clients are busy and are looking for a professional to handle all the details and advocate for them,” she says. “We are also fortunate to be able to choose to work with like-minded individuals who value premium advice and are a pleasure to work with.” As far as she’s come, Murdoch expects more milestones ahead on her career

UNLOCKING THE POWER OF CURIOSITY As one of Wealth Professional ’s nominees for Rising Star Advisor of the Year in 2020, Kate Murdoch knows a thing or two about what it takes to excel – and one key factor is the drive to ask questions. “Curiosity has always been a core characteristic of mine, and it’s served me well,” she says. “I think that when you don’t ask for clarity, you’re doing yourself a disservice; you’re holding yourself back. Taking time to ask questions early on – and identifying the people who can give good answers – allows you to progress faster, but in the right way.”

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FAST FACTS: KATE MURDOCH

PRACTICE Ridd & Associates Wealth Advisory Group

FIRM BMO Nesbitt Burns

LOCATION Newmarket, Ontario

“The never-ending opportunities to challenge myself, and seeing how that hard work can meaningfully improve clients’ lives, is what got me hooked on the profession”

AUM Roughly $220 million

NUMBER OF CLIENTS 170 journey. She’s currently furthering her expertise and ability to support clients by pursuing the Trust and Estate Practitioner (TEP) designation, which was recommended by both her mentor and an estate lawyer whom she highly respects. More broadly, Murdoch says she’s driven by the pursuit of perfection – a lofty and abstract goal, but one she’s committed to

chasing. As her own toughest critic, she recognizes that her enduring drive to excel has been instrumental in her ability to bring value to her clients and team. “I also aspire to be a leader in the industry and to inspire other professionals to continually elevate themselves,” she says. “To be a role model for others is an incredible honour and responsibility.”

AVERAGE ASSETS INVESTED PER CLIENT $1.5 million

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SPECIAL PROMOTIONAL FEATURE

TECHNOLOGY

A new frontier in analytics TMX’s Emily Choi tells WP how the company’s new TMX Logicly platform is transforming the type of data available to advisors IT’S BEEN just over six months since TMX launched its new TMX Logicly platform, which provides investment advisors, issuers, active funds and corporations with professional ETF analytics and liquidity scores – and according to Emily Choi, TMX’s director of advanced analytics, it’s been quite the journey so far.

“We don’t think that there are any close competitors,” Choi says of the platform. “It blends different pieces of research and analytics with portfolio management and construction, and we can also support the trading aspect. There’s really no one else on the street that does all three of those pieces at once.”

Choi was involved in TMX Logicly from the project’s inception, and while she admits that “the pandemic has not been the best time to enter a new market,” she’s been very pleased with its success so far. “At TMX, we sell our data to millions of people around the world, both consumers and vendors,” she says. “The bulk of the

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investment in recent years has been around analytics creation. We’re going much deeper, transforming raw data into more meaningful insights in very strategic areas of focus – one of those areas of focus is the ETF industry. “We partnered with a US firm called ETFLogic to bring this product to the Canadian market. We started with the ETF manufacturers first as a way to help profile their securities or their ETFs. And now we’re turning our minds to wealth management – we hope to grow adoption in the advisor space. The goal here is to provide advisors

product side … but strangely, we all use the same analytics for measuring and comparing funds that we did 20 years ago. “Wealth managers in particular are bearing the brunt of this responsibility to keep up to date with all those changes. So now more than ever, we’re seeing the need for efficient data and analytics to support the day-to-day job functions of advisors.” This is where TMX hopes to set something of a precedent for the rest of the industry. The company was on the ground floor of the ETF boom (“We listed the first

“Throwing more data and analytics at an advisor isn’t necessarily the right solution. Rather, it’s about throwing the right data and analytics at them in a way that complements their day-to-day tasks and workflow” Emily Choi, TMX with solutions that simplify their day-to-day. This is highly strategic for TMX, because we help to list these products, we make them accessible, and we sell real-time data on them. This is just the next evolution of that same path.” That evolution is something Choi is particularly interested in, especially when it comes to the potential synchronicity between developments in ETFs and analytics. While ETFs seem to be constantly evolving, she says, analytics in the industry had stagnated. “There hasn’t been much innovation in analytics for investment products in a while,” Choi says. “There’s over 24,000 mutual funds and segregated funds and over 1,100 ETFs and closed-end funds, so there’s no shortage of products to choose from. We’ve seen a lot of new innovations on the investment

ETF ever back in the ’90s,” Choi says), so it only makes sense for TMX to take the lead in transforming analytics for the industry. “We’re always focused on building new analytics products and launching those,” Choi says. “We have a really large listing, trading and data business at our core – and analytics is an offshoot of the data business. We have a higher ratio of actively managed funds than anywhere else in the world, and there’s been a flurry of crypto ETF launches in Canada. So it’s a very innovative space for us. And as we look to grow our analytics business, it’s just a natural fit for us to continue on the path of ETF innovation by launching this new data and analytics product. “Throwing more data and analytics at an advisor isn’t necessarily the right solution. Rather, it’s about throwing the right data and

analytics at them in a way that complements their day-to-day tasks and workflow. TMX Logicly is designed specifically to infuse analytics alongside the day-to-day workflow tasks like researching and comparing products or handling portfolio construction and management. It uses AI-powered portfolio optimization techniques to identify portfolio deviations and suggest actions or options for an advisor to enhance the portfolio. It also takes care of embedding a lot of the compliance-related requirements into this process, so it’s a lot easier for the advisor. “In terms of innovation, I think intergenerational changes are natural. They are always going to occur. We have the traditional data and analytics, including things like standard deviation, exposure breakouts and different performance metrics. But for the newer emerging generation of advisors, we have a lot more in-depth analytics like liquidity assessments, portfolio risk breakdowns and even tax loss harvesting opportunities – so we can get as deep as the advisor may want to go.” With TMX blazing a trail of innovation like this, does Choi have any predictions for the future of analytics development in general? “I anticipate we’ll see greater use of artificial intelligence, specifically applied to portfolio optimization,” she says. “More and more firms are racing to build this today. I see this as a tool to empower advisors to become more efficient at what they do. That way they can take on more clients, more portfolios, handle more risk categories and eventually grow their assets under management.” All rights reserved. This information is provided for information purposes only. Neither TMX Group Limited nor any of its affiliated companies guarantees the completeness of the information contained in this publication, and we are not responsible for any errors or omissions in or your use of, or reliance on, the information. This publication is not intended to provide legal, accounting, tax, investment, financial or other advice and should not be relied upon for such advice. The information provided is not an invitation to purchase securities listed on Toronto Stock Exchange and/or TSX Venture Exchange. TMX Group and its affiliated companies do not endorse or recommend any securities referenced in this publication. TMX, the TMX design, The Future is Yours to See., Toronto Stock Exchange, TSX, TSX Venture Exchange, TSXV and Voir le futur. Réaliser l’avenir. are the trademarks of TSX Inc. Logicly is the trademark of SigmaLogic Inc. and is used under license.

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SPECIAL PROMOTIONAL FEATURE

REAL ESTATE

Diving into an active market Canada’s multi-family residential sector is growing rapidly – and its upward trajectory will only continue over the next 10 years, according to Centurion Asset Management’s Greg Romundt

IN THE next decade, Canada will see the construction of more new apartments than it has in the past two generations, according to Greg Romundt, president of Centurion Asset Management. “There are a few reasons for this,” he explains. “Our population is growing, in absolute terms, faster than at any time. Affordability is certainly a concern for many people, and high-density living is really the only affordable choice for many Canadians. Also, as our society is aging, there are more people who are inclined to say, ‘Well, I’ll rent an apartment and then I won’t have to worry about some of the issues of actual ownership.’

so absolutely lots of opportunity.” Opportunity in the multi-family space is something Romundt is very familiar with. As head of Centurion, he’s overseen the company’s ongoing acquisition of multifamily properties, which have continued to reap great results. And the market is particularly buoyant right now. “I think the market is as active as I’ve ever seen it,” he says. “I believe that the COVID-19 pandemic shook up life’s inertia for many people – and this manifested in many different ways, such as people who lived in Toronto now having moved out of the city to buy their first homes. Then there are other people who said,

“I think the market is as active as I’ve ever seen it. I believe that the COVID-19 pandemic shook up life’s inertia for many people” Greg Romundt, Centurion Asset Management “So, I think there’s all those tailwinds behind the trend – meaning that everyone will be trying to focus on new apartment construction. If you think about the next decade or so with 450,000 people coming into Canada every year, that’s around 4.5 million people. That is a lot of condos, a lot of apartments –

‘You know, I’m going to retire.’ COVID was so challenging for someone with an old-school mentality that they decided now was the time to do that. “I also think that a lot of developers who got into the business had made an assumption that with apartment buildings, you can just

build them and people come in, almost like the buildings fill themselves. In many respects this was true up until COVID, unless you built a terrible quality building in a terrible location where no one lived. Otherwise, people were going to fill their buildings. They might not get the rent that they hoped for, but they were going to fill it up because we have a huge housing shortage in the country. “I think a lot of developers underestimated the operational challenges of day-to-day management of assets. And so now we’re seeing lots of large portfolios in the market where one of the partners is looking for an active manager partner. I think that’s going to be a growing trend where apartment managers are going to be the active partners to developers.” Coping with the impact of COVID-19 became a primary part of Centurion’s strategy, Romundt says, and it’s paid off over the past 18 months.

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“Many organizations weren’t ready for COVID in terms of online marketing and the ability to show suites to people who might not have wanted to actually visit in person,” he says. “Particularly in the early days of COVID, it was a real challenge for some people. But it wasn’t for us because we’ve been in the student housing business for a very long time. A lot of our student residents are overseas students – so very often, we’re giving tours to people who aren’t living in the country, and we did that using technology like FaceTime and Skype. That was integrated into our operational policies, where I think a lot of owners didn’t have those policies and procedures. “A forced acceleration happened in our industry. Some people said they didn’t need certain technologies before – now, if they don’t have them, they’re at a distinct competitive disadvantage in terms of leasing and staying full. So I think people have to catch up.”

Given all these complications and challenges, is there a formula behind Centurion’s ongoing success? “We’ve been very focused on the new construction industry and new apartments that have been developed or are in the process of development,” Romundt says. “We’ve been very active in financing developers on the debt and equity side with a view to buying the completed product. That’s really been the primary driver of our continued growth. “You’ve got to have all the different working components. You’ve got to be able to continually perform operationally and lease up your properties. If you don’t perform, you can’t raise capital, and if you can’t raise capital, you can’t buy – and then you can’t grow. We’ve put a lot of time, effort and thought into building systems, training people and on building a culture that is focused on success. And all of those parts together make things work. If we didn’t have an engaged workforce, things

would be very challenging.” It’s this combination of an exceptional corporate culture and a thriving market that makes the future especially bright for Centurion. “I’m very optimistic on the multi-residential space because the amount of new apartments that are going to get built in this country is going to continue to increase,” Romundt says. “And given how much housing prices have advanced, particularly during COVID, a number of people have been priced out, and they’re going to need to turn to rental. So I do think that there’s going to be a continuous flow of new developments. “We’re in a market where interest rates are very low, and this has led to a significant amount of opportunity for long-term investors to acquire assets. I know most of my competitors are very busy, just as we are, and we will probably continue to grow this year at the fastest pace we ever have.”

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SPECIAL PROMOTIONAL FEATURE

MORTGAGE INVESTMENT CORPORATIONS

Getting into the mortgage game CMI’s Julian Clas tells WP why advisors looking for portfolio diversification options should consider a mortgage investment corporation

THE SPOTLIGHT is increasingly shining on mortgage investment corporations (MICs) as one of Canada’s fastest-growing alternative assets. At the forefront of the MIC landscape is CMI MIC Funds, a suite of MICs that fund mortgages in regional markets across Canada, providing investors with access to a diversified pool of residential mortgages that deliver targeted annual yields ranging from 6% to 11%. So what makes MICs so attractive as an alternative investment? “Mortgages provide the opportunity to generate enhanced regular returns while providing risk mitigation and capital preservation benefits,” explains Julian Clas, vice-president of capital markets and funds at CMI Financial Group. “These benefits are typically enhanced when you invest in a portfolio of mortgages. “Yields on government bonds are averaging 1% to 3%. When factoring inflation, real yields are either negative or barely breaking even. Compare that with our Balanced Mortgage Fund, for example. For 2021 so far, we’ve delivered a yield of 8.43% to investors. It’s a significant difference, and investors are taking notice.” Since 2019, Clas has more than doubled CMI’s assets under management and helped it become the first MIC to be offered on several leading brokerage platforms, improving

investor access and gaining exposure within the advisor community. “CMI’s offering, which invests almost exclusively in residential mortgages, includes three funds with targeted yields tied to specific risk and return profiles,” Clas explains. “Our Prime Mortgage Fund is our most conservative fund. It minimizes volatility by investing

of its long-term value. It invests primarily in second mortgages with a maximum weighted loan-to-value of 85%.” While Clas notes that the choice of fund will be dictated by an investor’s investment objectives, time horizon, return/income needs and risk tolerance, he adds that risk is always relative.

“Throughout the COVID-19 pandemic, volatility rocked global stock and bond markets, but mortgage investments remained relatively stable” Julian Clas, CMI Financial Group primarily in first mortgages, to a maximum weighted loan-to-value ratio of 65%. That fund aims to deliver a net annual return to the investor of 6% to 6.5%. “Our Balanced Mortgage Fund is our medium-yield fund, targeted to a net annual yield of 8% to 9% by investing almost evenly between first and second mortgages, to a maximum weighted loan-to-value of 75%. “Then we have our High Yield Opportunity Fund. This is our most aggressive fund in terms of its yield and risk profile, and in terms

“Every investor has a different perception of risk,” he says. “And while there is more absolute risk with mortgages outside of first positions or with higher loan-to-values, all mortgages are backed by the borrower’s property. To put things into perspective, our loss rate is well below 1%, and because private mortgages are uncorrelated with public markets, there’s inherently less volatility than traditional stocks and bond investments. That’s why a portfolio with mortgage exposure is generally better positioned

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to weather unexpected events. We saw this throughout the COVID-19 pandemic, where volatility rocked global stock and bond markets, but mortgage investments remained relatively stable. “A key draw of MIC investing is the potential for above-market returns compared to other fixed income securities like government bonds, coupled with a smoother ride, which is what investors are really looking for.” And given the unstoppable rise of Canada’s housing market, Clas is bullish about MICs’ potential in the near future. “Residential-focused funds have always had a place within an investor portfolio, but the current trend of work from home has certainly shifted focus back into the residential lending space, and we do see this shift continuing for the short to medium term,”

he says. “The trend is driving increased volumes both from an underwriting and capital perspective.” And as homebuyers continue to migrate out of expensive metropolitan areas, he adds, that’s spurring increased geographic diversification – something that should be a key consideration for advisors and investors when considering whether to invest in a MIC. “For a MIC to continue to grow like CMI’s funds have been doing,” Clas explains, “having a national mandate gives the fund the flexibility to take advantage of certain trends like migrating away from large urban areas to smaller urban centres.” As Canada enters the next phase of the pandemic – and with record low interest rates on the horizon for the foreseeable future – advisors will need to re-evaluate the

fixed income portion of their clients’ portfolios. That should drive continued growth in the number of investors turning to alternative strategies in general – and MIC funds in particular. “As any advisor would tell you, investors today are much more knowledgeable and knowledge-seeking,” Clas says. “They’re researching different topics and reading about how they can maximize their portfolio returns. They’re not passively waiting for their advisor to bring them opportunities. “The result is that much of our asset growth has been investor-driven. Investors have been doing their own due diligence about our funds, and they like what they see. They’re getting into an investment type that they otherwise wouldn’t have heard of a decade or two ago. It’s a trend I expect to continue.”

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FEATURES

LEADERSHIP

Leadership in the post-pandemic workforce Since the social restrictions introduced in 2020 forced much of the workforce to conduct business remotely, employers have been preparing for what the workplace will look like moving forward. Michelle Gibbings offers some tips for leading in the new working world

WITH COVID-19 has come challenge and opportunity for workplaces. As you look to the future as a business leader, what do you want to leave behind and carry forward in terms of how you work? Answering this question is important on two fronts. First, it’s too soon to go back to pre-pandemic ways of working, and second, COVID has accelerated workplace change, with much of it here to stay. Deciding how to go forward starts with identifying what’s working for you, your team and your organization. Think about what you have enjoyed, the benefits you have gained and why you want them to continue. Write these thoughts down and reflect on why they matter. Next, look at what hasn’t worked and why. Identifying the root cause is important to determine if a new way of working should be disbanded or just needs to be tweaked. It

can be helpful to invite your team members to participate in this review so you get their perspective on the workplace. Doing this also helps build their buy-in and commitment to future change.

the office banter and casual conversations. These impacts translate into variations in productivity and engagement. Consequently, it’s essential to recognize each team member’s needs and understand what they require to be at their best at work.

Recognize different needs As part of this process, recognize that the level of adjustment and adaptation required across workplaces has and will continue to be mixed. For some employees, the rapid move to working from home has been successful, meaning less commuting, better work-life balance and access to effective technology to support productivity. For others, it has been stressful if they are juggling home schooling or lack a defined workspace or the technology they need to work effectively. Added to that, people who draw energy from connecting with their colleagues are missing

Create choice Many organizations are now using the term ‘work from anywhere,’ signifying that the traditional model of sourcing employees who are willing to be locally based or to travel frequently has shifted. This opens organizations to a broader talent pool. For employees, it also means they are no longer geographically hamstrung when it comes to applying for new roles. Also, some people are keen to get back to the office and others less so. Examine your workforce and roles to determine the options and flexibility that can continue.

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It’s essential to recognize each team member’s needs and understand what they require to be at their best at work Know when virtual doesn’t work

Step up and lead

Working from home is here to stay, but connection and time spent with team members and colleagues will always be necessary. Humans are tribal creatures who are hardwired for connection. Part of the joy that people experience at work comes from the banter and chats they have with their colleagues. Nothing can replace the casual corridor conversation or chat in the break room. Recognize that not everything can be done remotely (or done as effectively remotely). Leaders will want to consider where face-toface sessions are more productive and effective, and where remote will work just as well.

Leadership matters, whatever the working environment – be it the office or home. The best leaders appreciate this and are shifting and elevating their leadership style to suit these new circumstances. They understand that in times of challenge and uncertainty, they need to provide more, not less, leadership. People want to feel they matter and know they are valued. Leaders should continue to set regular times to check in with their teams. These check-ins aren’t just about how tasks are progressing; they’re about finding out how the team member is doing in terms of emotional and mental health, too.

Support healthy practices Central to creating a healthy environment is the relationship a leader has with their team. Successful relationships are underpinned by psychological safety – an environment in which people are comfortable sharing what is or isn’t working for them and how they are feeling, and being their authentic selves. It helps if leaders role model self-care behaviors. Encourage your team to take care of their physical and mental health. Suggest they take regular breaks, notice and manage workplace stress, and have a safe space where they can talk about their mental health and well-being. Michelle Gibbings is a workplace expert and the author of Step Up: How to Build Your Influence at Work, Career Leap: How to Reinvent and Liberate your Career, and the new book Bad Boss: What to Do if You Work for One, Manage One or Are One.

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PEOPLE

OTHER LIFE

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

Over the cou rse of his CF L ca reer, Bighill has twice ea rned the coveted title of Defensive Player of the Y ea r

Number of Grey Cups Bighill’s teams have won

675

Total tackles he made from 2011 to 2019

Number of seasons he’s been named a CFL All-Star

LIVING FOR THE GAME When he’s not making financial plans for clients, Adam Bighill is making plays on the football field GROWING UP, Adam Bighill had an all-consuming passion for football. “My dad played football when he was young,” he says. “We watched it on TV all the time. I just loved it.” Bighill started playing when he was about seven, and he’s never stopped. “It’s an amazing, physical team sport,” he says. “Every single person has to do

the right thing.” Bighill has dedicated his life to perfecting his play – including training, stretching and eating right, among other routines – and it shows. Over his 10-year CFL career, he’s established himself as a top defensive player, won two Grey Cups and earned multiple All-Star awards. Today, Bighill has even more on his plate,

as he divides his time between being an investment advisor at Wellington-Altus Private Wealth and playing for the Winnipeg Blue Bombers. “I’ve never been busier in my life,” he says. “I wake up at 5 a.m., and I have to be very diligent. It’s all about putting in the hard work and the time needed, and at some point that’s going to pay off.”

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1633297 MI Global Equities Print Ad - WP - 8.25x10.875 - EN.pdf

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Introducing BMO’s suite of Innovation ETFs

ZINN ZFIN ZGEN ZINT ZAUT Drive growth in your portfolio by investing in thematic and technology-focused innovation such as Fintech, Genomics, Autonomous Tech and Next Gen Internet. BMO ETFs: Where innovation meets investing bmogam.com/megatrends BMO Global Asset Management is a brand name that comprises BMO Asset Management Inc., BMO Investments Inc., BMO Asset Management Corp., BMO Asset Management Limited and BMO’s specialized investment management firms. 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. Commissions, management fees and expenses all may be associated with investments in exchange traded funds. Please read the ETF Facts or prospectus of the BMO ETFs before investing. Exchange traded funds 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 BMO ETF’s prospectus. BMO ETFs 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. /™Registered trade-marks/trade-mark of Bank of Montreal, used under licence.

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