Wealth Professional 5.09

WWW.WEALTHPROFESSIONAL.CA ISSUE 5.09 | $12.95

OUTSTANDING ADVISORY TEAMS Nine of Canada’s best advisory firms demonstrate what sets a top-performing team apart from the rest

THE GLOBAL PERSPECTIVE

What are the current best bets for diversifying outside of Canada?

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DRIVING INNOVATION

Sun Life Financial head Dean Connor outlines how he’s prioritizing technology

BEYOND INTEREST RATES

How to navigate fixed income in a changing environment

20/10/2017 2:14:44 AM

Go beyond ordinary income.

More asset classes.

More regions.

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Speak with your iA Clarington representative or visit iaclarington.com/gobeyond The information provided herein does not constitute financial advice. Always consult with a qualified advisor prior to making any investment decision. The opinions expressed herein are those of iA Clarington.

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. The iA Clarington Funds are managed by IA Clarington Investments Inc. iA Clarington and the iA Clarington logo are trademarks of Industrial Alliance Insurance and Financial Services Inc. and are used under license.

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ISSUE 5.09

CONNECT WITH US

CONTENTS 36

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

UPFRONT 02 Editorial

The silver lining of tax reforms

04 Head to head

Advisors sound off on the government’s latest tax moves

OUTSTANDING ADVISORY TEAMS

26 SPECIAL REPORT

OUTSTANDING ADVISORY TEAMS 2017

It’s not hard to see why these nine high-performing teams have been entrusted with managing billions of dollars

PEOPLE

INDUSTRY ICON

06 Statistics

FEATURES

BROADENING YOUR HORIZONS

Mackenzie Investments’ new funds satisfy investors’ appetite for diversification outside of Canada

08 News analysis

Is industry consolidation a raw deal for investors?

10 Intelligence

This month’s big movers and shakers

12 ETF update

The building blocks of a global ETF

14 Alternative investment update

40 FEATURES

PROTECTING ON THE DOWNSIDE Why fixed income is an essential part of every portfolio, even when returns are low

A hassle-free way to invest in bitcoin

16 Health insurance update

The US healthcare debate pushes Canada toward universal care

18 Life insurance update

BC cracks down on third-party sales

20 Opinion

What it will take to build public trust in financial planning

PEOPLE

Sun Life Financial president and CEO Dean Connor reveals how his company is driving industry innovation

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Why proper tax planning is more important than ever

38 Advisor profile

Tina Tehranchian reflects on her journey from Iran to running her own team

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FEATURES

CRITICAL THINKING ON CRITICAL ILLNESS Are your clients leaving themselves exposed to a major financial risk?

46 Career path

Monica Weissmann’s route into financial advice has been anything but typical

48 Other life

Christian Jaehn-Kreibaum makes history come alive

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

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20/10/2017 3:17:20 AM

UPFRONT

EDITORIAL

Ottawa Incorporated

T

ax reform is top of mind these days for Canada’s financial advisors. The government has targeted private corporations that use income sprinkling, passive investment portfolios and the conversion of a regular income into capital gains, and has heard plenty of opposition as a result. Doctors, dentists, farmers and a variety of other small business owners have all voiced their displeasure, and advisors haven’t been short of critical words either.

Consequently, Finance Minister Bill Morneau saw fit to explain his reasoning behind the proposed tax changes in an interview with the Globe and Mail: “We’re actually giving people incentive to sit the dead money on their balance sheet and invest it in something else,” he said. “We’ve created a big, gaping hole for tax planning, and at the same time, a decreased likelihood that people are going to invest in their business.”

As an investment incentive, the plan is full of holes, according to respected entrepreneur John Risley. Speaking to BNN, the Fine Foods magnate said: “If

Despite the growing opposition, so far the government’s commitment to tax reform has not wavered. This presents an opportunity for those who dispense financial advice you’re a successful entrepreneur and you want to reinvest through your own company … the tax consequences under this new legislation are going to be so punitive that you’d be crazy to do it.”

There is real division on the issue, and the majority of advisors seem to be more in line with Risley’s opinion than Morneau’s. But despite the growing opposition, so far the government’s commitment to tax reform has not wavered. This presents an opportunity for those who dispense financial advice, as Carrie Kimberley, director of practice management at Credential Financial, told WealthProfessional.ca last month. “From an advisor standpoint, there are opportunities to deepen their client relationships and provide the added value that advisors need in order to stay competitive.” Kimberley also recommended that advisors clearly communicate what the exact changes are and how their clients may be impacted.

While the industry generally has not welcomed Ottawa’s latest plan, this appears to be one government move that might have a silver lining for advisors.

The team at Wealth Professional Canada

wealthprofessional.ca ISSUE 5.09 EDITORIAL

SALES & MARKETING

Editor David Keelaghan

National Accounts Manager Dane Taylor

Writers Libby Macdonald Leo Almazora Joe Rosengarten

Associate Publisher Trevor Biggs

Executive Editor – Special Features Ryan Smith

Project Coordinator Jessica Duce

Copy Editor Clare Alexander

CONTRIBUTORS Cary List

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

General Manager, Sales John Mackenzie

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

david.keelaghan@kmimedia.ca

SUBSCRIPTION INQUIRIES

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

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

Wealth Professional Canada is part of an international family of B2B publications and websites for the finance and insurance industries LIFE HEALTH PROFESSIONAL david.keelaghan@kmimedia.ca T +1 416 644 874O

INSURANCE BUSINESS CANADA john.mackenzie@kmimedia.ca T +1 416 644 874O

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

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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

20/10/2017 3:18:34 AM

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INSIGHTS DRIVE CHANGE. 63% of Canadian investors said socially responsible investments will become more important to their portfolios.

Introducing the

Mackenzie Global Sustainability and Impact Balanced Fund.

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Find out more about our diverse suite of innovative investment solutions.

Talk to your Mackenzie Representative.

Commissions, trailing commissions, management fees, brokerage fees and expenses all may be associated with investment funds. Please read the prospectus before investing. Investment funds are not guaranteed, their values change frequently and past performance may not be repeated. A survey of 412 Canadian advisors was completed online between June 20 and July 12, 2017 using Environics’ Advisor Research panel. A probability sample of the same size would yield a margin of error of +/- 4.8%, 19 times out of 20. A survey of 1247 Canadians 18 – 75 years old, who have an investment portfolio or plans to begin investing in the near future was completed online between June 27 and July 11, 2017. A probability sample of the same size would yield a margin of error of +/- 2.8%, 19 times out of 20.

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MUTUAL FUNDS

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PRIVATE WEALTH POOLS

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MANAGED ASSETS 2017-10-02 9:23 AM 20/10/2017 3:18:37 AM

UPFRONT

HEAD TO HEAD

Do you support the latest government tax proposals?

Finance Minister Bill Morneau says the changes will make for a fairer system, but advisors tend to disagree

Glen Rankin

Rona Birenbaum Financial planner Caring for Clients

Managing partner, financial advisor B & A Financial Group

“I am opposed to Morneau’s tax proposals. The Trudeau government is single-handedly going to destroy small business in Canada. The changes are broader than we’ve been led to believe and ill-founded. The summer release with a short consultation window was unfair.

As presented, the changes are retroactive and will result in reduced access to doctors (they will leave or change their service models), the sale of family businesses to outsiders, double or triple tax of up to 90% on the death of a business owner, layoffs in all sectors, and the destruction of farm and business emergency funds.”

“The proposed changes have been framed as a means of closing ‘loopholes’ and creating ‘fairness’ between business owners and employees. Business owners are financially under attack, as the proposals seek to eliminate many incentives designed to stimulate risktaking, innovation and investment.

The strategy is troubling particularly in its short-sightedness. The likely result is that tax revenue will increase shortterm and be compromised long-term.

Perhaps the government believes they can spend the money more wisely than business owners. It doesn’t have to be an either/or scenario; a well thought-out compromise is the optimal approach.”

“Finance Minister Morneau’s proposals are not in the country’s best interest, do not accomplish his goal of tax fairness, and I don’t support them.

Entrepreneurs are the backbone of our economy – they create jobs and take risks that most other taxpayers don’t.

Morneau is now acting as if they have cheated on their taxes. The ‘income sprinkling’ issue is more complicated than outlined; entrepreneurs accumulate capital in passive investments for growth, retirement and hard times. Shareholders should be allowed to claim the capital gains exemption – a commensurate reward for risk. If the goal is fairness, then consider the entire tax code.”

Senior wealth advisor Assante Wealth Management

Philip Boland

FAIR GAME? Business owners earning $150,000 or more a year are the group most likely to feel the full effect of the proposed tax changes unveiled in Ottawa in July. Among the modifications designed to “improve fairness in the tax system” are limits on business owners’ ability to convert income into capital gains and dividends, to lower their tax rate by ‘sprinkling’ funds to family members, and to use passive investments as a means of recovering taxes. Despite a widespread outcry, Finance Minister Bill Morneau insisted that two-thirds of small business owners will not be affected “at all” by the proposed changes.

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20/10/2017 2:20:55 AM

THE SOLUTION TO VOLATILITY: ADAPT-ABILITY Today’s rapidly changing markets can be volatile.

But for those able to adapt, changing conditions also present new opportunities. It’s why we employ a flexible approach, adjusting the fund’s allocations to capitalize on equity and fixed income opportunities worldwide, while at the same time mitigating risk.

TEMPLETON GLOBAL BALANCED FUND

HHHH Morningstar Rated Fund1

Find out more at franklintempleton.ca/globalbalanced

1. As of September 30, 2017. The Morningstar Rating™ for funds, or “star rating,” is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product’s monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five- and 10-year (if applicable) Morningstar Ratings metrics. The weights are 100% threeyear rating for 36–59 months of total returns, 60% five-year rating/40% three-year rating for 60–119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10-year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods. Templeton Global Balanced Fund is rated within the Morningstar Tactical Balanced category. All performance data refers to Series F units. Please refer to www.morningstar.ca for more details on the calculation of Morningstar Risk-Adjusted Ratings. For each of the 3, 5 and 10 year performance periods, there were in total 229, 170 and 32 funds, respectively, in the Morningstar Tactical Balanced category. Please refer to www.morningstar.com for the 1-year information. The historical annual compound rates of return for Series F units of Templeton Global Balanced Fund as of August 31, 2017, are: 1 year 8.07%; 3 years 6.57%; 5 years 10.41%; 10 years 6.39%, and 6.68% since inception (December 12, 2005). The indicated rates of return are historical annual compounded total returns including changes in unit or share value and reinvestment of all distributions and dividends and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any security holder that would have reduced returns. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus or fund fact document before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. © 2017 Franklin Templeton Investments Corp. All rights reserved.

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20/10/2017 2:20:55 AM

UPFRONT

STATISTICS

Maxed out on taxes

TAX BILLS RISING SHARPLY

Canadians are spending increasingly more income on taxes, highlighting the need for proper tax planning TAXES ARE a hot-button issue in Canada right now due to the federal government’s proposed tax reforms on incorporated businesses, which have prompted an outcry from financial advisors. Taxes aren’t just a cause of frustration for the self-employed, though – the latest version of the Fraser Institute’s Canadian Consumer Tax Index indicates that all Canadians are paying a higher percentage of their income in tax than ever before.

$83,105

$35,283

Income of the average Canadian family in 2016

Amount of that income (42.5%) that went to taxes in 2016

The think tank found that the total tax bill of the average Canadian family had increased by 2,006% from 1961 to 2016. Income has increased substantially during that time, too, but not as much as the proportion going to the government, thereby eliminating a lot of gains.

With many financial advisors now offering tax planning help, the data suggests most people would be wise to seek the guidance of an expert when it comes to limiting their tax bill.

33.5%

The taxes Canadians pay are a much higher proportion of income today than in the 1960s – tax spending has ballooned by 2,006% between 1961 and 2016. Tax growth has outpaced increases in other staples such as shelter (1,527%), food (639%) and clothing (677%).

3.8%

Percentage of income the average family paid in taxes in 1961

Increase in the average family’s tax bill between 2014 and 2016 Source: The Fraser Institute’s Canadian Tax Simulator, 2017

FOLLOWING THE MONEY

HOW TAX OBLIGATIONS HAVE GROWN

Despite the high cost of living in many areas of Canada today, taxes remain the largest expense for households by far.

AVERAGE FAMILY'S EXPENDITURES AS A PERCENTAGE OF INCOME Taxes ter Shel o F od

11.2% 4.1%

22.1%

O

TAXES PAID BY THE AVERAGE CANADIAN FAMILY, 1961–2016 $80,000

Average cash income $70,000

Tax bill

$60,000

3% 21.

g thin Clo er* th

Today’s Canadian taxpayers are spending much more of their income on taxes than their parents and grandparents did.

While wages have increased by 1,562% since the 1960s, tax increases have exceeded income growth.

$50,000 $40,000 $30,000

5% 42. *Includes communications, child care and pet expenses, transportation, healthcare, recreation, education, tobacco products, and alcoholic beverages Source: The Fraser Institute’s Canadian Tax Simulator, 2017

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$20,000 $10,000 1961 1969 1974 1976 1981 1985 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Source: The Fraser Institute’s Canadian Tax Simulator, 2017

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1961 1969

TAXES VERSUS OTHER EXPENDITURES

1974 1976 1981

Taxes

Shelter

Food

Clothing

1985 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016

0

$10,000

$20,000

$30,000

$40,000

$50,000

$60,000

$70,000

Source: Statistics Canada, The Fraser Institute’s Canadian Tax Simulator, 2017

THE INFLATION EFFECT

TAX BREAKDOWN

Even after adjusting for inflation, taxes have increased by a significant amount – 157% – since 1961. In 2016 dollars, the average 1961 tax bill would have been just $13,699; by 2016, it had crested $35,000.

Between provincial and federal obligations, Canadians pay a variety of different levies each year.

INFLATION-ADJUSTED TAX BILL

Liquor, tobacco, amusement and other excise

$40,000 $35,000

0.6%

5.2% 11.2% Profit 2.7%

$30,000 $25,000

11.3%

Property

$20,000

Sales

1961 1969 1974 1976 1981 1985 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 Source: The Fraser Institute’s Canadian Tax Simulator, 2017

Natural resource

31.1%

Income

Fuel, motor vehicle licence and 0.9% Other carbon

14.4%

$15,000 $10,000

2.4% Import duties

20.3%

Payroll and health Source: The Fraser Institute’s Canadian Tax Simulator, 2017

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20/10/2017 2:22:02 AM

UPFRONT

NEWS ANALYSIS

Consolidation conundrum Given the raft of M&As in the wealth management space in 2017, are independent firms living on borrowed time?

IT’S BEEN a busy year for mergers and acquisitions in the wealth management space. In an effort to expand their businesses, a host of asset managers and advisory firms have elected to buy the operations of smaller players. On the advisory side, iA Financial completed its acquisition of HollisWealth, while CI’s purchase of Sentry, along with Sun Life’s deal with Excel Funds, certainly turned heads in the asset management space.

Consolidation in the industry has been a trend for some time now – independents are increasingly being swallowed up by larger institutional names. But does this go against the interests of everyday investors?

Not in the opinion of Bhim Asdhir, the president and CEO of Excel Funds. Selling the firm he founded back in 1998 to Sun Life

have been able to capture a big chunk of that opportunity. When you partner with a financial institution like Sun Life, many things happen. Their endorsement of emerging markets means people take it seriously.”

In signing the deal to acquire Excel Funds’ outstanding shares, Sun Life Global Investments president Rick Headrick knew he was getting a proven entity. Products like the flagship Excel India Fund, which has a 19-year track record, meant the acquisition was much more attractive to SLGI than launching its own emerging market funds.

“SLGI was seven years old on October 1, and one of the things we have learned is that when you bring a subadvisor to another country, it takes time,” Headrick says.

“Financial advisors will rightly say, ‘Prove it works in Canada.’ With Excel Funds, they are

“Many [consolidations] are distressed sales – this deal [between Excel and Sun Life] was none of that. This was a win-win” Bhim Asdhir, Sun Life Global Investments was certainly a tough decision for Asdhir, but it’s not one he regrets.

“Canadian mutual funds in emerging markets – this is a $100 billion opportunity over the next five years,” he says. “Excel Funds, being a small entity, we would not

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proven, so it made a lot of sense for us to hit the ground running.”

While overall industry consolidation is certainly a concern, in this particular case, Asdhir sees only positives. “You see a lot of consolidation, but many of those

are distressed sales – this deal was none of that,” he says. “This was a win-win. We were net-positive financially, stable, and in my opinion, strong. We would have carried on and got there, but it would have taken a lot longer. Sun Life’s economies of scale mean it can do so many things we couldn’t do.”

Even during a time of increased M&A activity, there are independent firms that are thriving, such as asset manager Beutel Goodman, which celebrates its 50th anniversary this year. Managing director Bruce Shewfelt outlines how smaller operators can still compete in 2017.

“Part of the challenge with investment managers is when they lose focus,” he says.

“You can’t be everything to everybody. There will always be a place for firms that can add value for the clients in both performance

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20/10/2017 2:22:51 AM

THE YEAR IN M&AS In April, Sprott announced it was selling its Canadian diversified asset business to a group led by executives John Wilson and James Fox of Sprott Asset Management. The new entity is now named Ninepoint Partners.

In August, CI Financial signed a deal worth $780 million to acquire Sentry Investments, which will bring its AUM to $140 billion when completed. iA Financial completed its acquisition of HollisWealth from Scotiabank this summer, making it one of Canada’s largest wealth managers, with nearly $80 billion in AUM. Sun Life Global Investments announced in September that it had signed an agreement to purchase all the outstanding shares of both Excel Funds Management and Excel Investment Counsel, making it Canada’s leading provider of emerging market mutual funds.

Also in September, Purpose Investments inked an agreement to pay $32.9 million for LOGiQ Asset Management’s retail business. and capital preservation, as well as holding clients’ hands in difficult times.”

As an example of this philosophy in action, Shewfelt points to Beutel Goodman’s flag-

institutional accounts, we handsomely beat the benchmark on an annualized basis for our clients,” Shewfelt says. “We have turned away billions of dollars in new flow requests,

“As an independent firm, we can choose sustainability over profit maximization, and ... that has built client loyalty” Bruce Shewfelt, Beutel Goodman ship Canadian equity fund. The firm took the calculated risk of closing the fund five years ago, refusing to take in new institutional money, and the results since have vindicated the decision.

“Since closing our flagship fund to new

which certainly would have padded our bottom line. But as an independent firm, we can choose sustainability over profit maximization, and we really think that has built client loyalty over the years.”

According to its leadership, Beutel

Goodman’s strength is in its investment and operational autonomy. This comes from an ownership structure that puts 51% in the hands of employees or retired partners, and 49% with US firm Affiliated Managers Group. That gives Beutel Goodman the ability to control its own destiny, which Shewfelt believes is how independents can survive further industry consolidation.

“What clients will always want from an investment manager is preservation of capital and adding value that is over an index,” he says. “If active investment firms like Beutel Goodman can deliver those things, keep our client focus and can keep our business model simple, then we can control our own destiny, versus selling to a big organization with the potential to lose those things.”

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UPFRONT

INTELLIGENCE CORPORATE ACQUIRER

TARGET

PRODUCTS COMMENTS

CI Financial

BBS Securities

CI will acquire fintech firm Pario Technology and robo-advisor Virtual Brokers

Invesco

Guggenheim Funds

Invesco has acquired control of Illinois-based Guggenheim’s ETF business

Purpose Investments

LoGiQ Asset Management

LoGiQ has agreed to let Purpose take over its retail asset management contracts, as well as those owned by its affiliates

Sun Life Financial

Excel Funds Management

The acquisition will expand Sun Life’s shelf with emerging market offerings and Excel’s ETFs

PARTNER ONE

PARTNER TWO

COMMENTS

Canadian Securities Exchange

OTC Markets Group

The partnership will make it easier for international companies to get listed and trade on exchanges owned by the CSE and OTC Markets Group

Horizons ETF Management

AlphaPro Management

The two firms, which already share the same management team, are merging to create a more streamlined corporate structure

BMO announces changes to Ascent Portfolios

BMO Investments has announced fee reductions and new investment minimums for its BMO Ascent Income, Conservative, Balanced, Growth and Equity Growth portfolios. The management fee for Series A units has been reduced from 1.5% to 1.4%, and the fee for series F securities has been lowered from 0.75% to 0.65%. The minimum initial investment for all funds has been raised from $25,000 to $75,000, while the minimum maintaining balance, originally $20,000, has been increased to $60,000.

LOGiQ agrees to sell retail fund management business to Purpose Investments

LOGiQ Asset Management has announced it is selling all of its retail asset management contracts, as well as those owned by its affiliates, to Purpose Investments for a tentative price of $32.9 million.

“We believe that as scale becomes critical for retail fund managers, the benefits of a larger platform such as Purpose’s will translate into significant benefits for fund investors,” said LOGiQ President and CEO Joe Canavan. He added that the resulting improvement in liquidity will allow the firm to grow in areas outside retail funds, including LOGiQ’s institutional global sales and private client businesses.

The transaction is expected to close by the end of December, pending approval from fund securityholders, securities regulators and investors with interests in LOGiQ.

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Educators Financial makes change to fund objective

Educators Financial Group, which manages the Educators North American Diversified Fund, has announced a change to the fund’s fundamental investment objective. Originally a mutual fund investing equity securities issued within Canada and the US, the fund will now focus primarily on US equity securities. In conjunction with this change, the fund has been renamed the Educators US Equity Fund. In addition, Beutel Goodman has been appointed as the fund’s portfolio advisor.

www.wealthprofessional.ca

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20/10/2017 2:23:26 AM

PEOPLE TD Asset Management adds North Americanfocused funds

TD Asset Management has launched a new US equity fund and a North American small-cap equity fund. The TD US Dividend Growth Fund actively invests in top-tier, dividend-paying US companies; it seeks income and capital growth, managing market volatility through reinvested dividends.

Meanwhile, the TD North American Small-Cap Equity Fund uses a quantitative strategy to invest in smalland medium-sized companies in the US and Canada that feature growth and sustainable leverage, and are expected to outperform the market.

Norrep Capital introduces flat management fee

Norrep Capital Management has introduced Canada’s first flat management fee pricing with its Z Series, available for the Norrep Core Canadian, Core Global and Premium Growth Class funds. The new fee model replaces the typical annual MER model that is calculated as a percentage of assets. Under the new model, advisors and investors on fee-based accounts will pay a 1% management fee monthly until they hit a cap of $1,000 per fund, per account. The funds require an investment of between $100,000 and $1 million.

NAME

LEAVING

JOINING

NEW POSITION

Heather Brilliant

Morningstar

First State Investments

Managing director, Americas

Adlai Chester

N/A

Mainstreet Health Investments

Chief investment officer

Vincent Duhamel

Lombard Odier & Co.

Fiera Capital

Global president and COO

Stevan Lewis

N/A

Sun Life Assurance Company of Canada

Senior vice president of digital transformation

Jeff Moody

N/A

Gluskin Sheff and Associates

President and CEO

Fiera Capital names global president and COO

Fiera Capital Corporation has appointed Vincent Duhamel as its global president and COO, effective November 14. Duhamel’s responsibilities will include overseeing distribution operations and global corporate functional units, as well as playing a role in strategic acquisitions.

Duhamel joins Fiera Capital from Lombard Odier & Co., one of Europe’s largest private banks, where he had been capital partner and chief executive for Asia since 2011. Prior to that, he held numerous leadership roles, including CEO of private hedge-fund sponsor SAIL Advisors and CEO of State Street Global Advisors in Hong Kong. “Vincent’s leadership skills and global financial experience as a senior executive at major investment firms make him a perfect candidate,” said Fiera president and CEO Jean-Guy Desjardins.

Gluskin Sheff appoints new CEO

NEI reduces fees on four of its funds

NEI Investments has announced pricing reductions on the NEI Global Total Return Bond Fund, Northwest Specialty Global High Yield Bond Fund, Northwest Tactical Yield Fund and the Northwest Tactical Yield Corporate Class. The management fees and/or fixed administration fees on select series of the funds have undergone reductions ranging from 5 to 15 basis points. These changes have resulted in overall pricing reductions of 10 to 25 basis points.

Gluskin Sheff and Associates has named Jeff Moody as its new CEO. Moody replaces Tom MacMillan, an industry veteran who headed the firm for just over a year. Moody has been with Gluskin Sheff since 2001, serving as senior executive vice president for investments and client wealth management, as well as chair of the asset mix committee.

Before that, he was a managing partner with Gryphon Investment Counsel, an independent firm that managed pension and endowment assets worth around $2.6 billion.

“The board of directors is very confident in Jeff’s leadership capabilities, given his long history and strong performance with the firm,” said lead director Nancy Lockhart.

www.wealthprofessional.ca

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UPFRONT

ETF UPDATE NEWS BRIEFS Horizons ETFs announces new developed markets fund

Horizons ETFs has launched the Horizons International Developed Markets Equity Index ETF (HXDM) on the TSX. The fund provides indirect exposure to the popular MSCI EAFE Index, which encompasses developed market stocks outside of North America. Also available in US dollar-denominated units, HXDM aims to provide low-cost, tax-efficient exposure to markets that include Australia, Europe, Japan and the UK. The ETF targets the performance of the Horizons EAFE Futures Roll Index (Total Return), which reflects returns from notional investments representing a series of futures contracts on the MSCI EAFE Index.

WisdomTree introduces three new dividend ETFs

WisdomTree Asset Management Canada has launched three new dividend equity funds. The WisdomTree Canada Quality Dividend Growth Index ETF (DGRC), with a management fee of 0.21%, provides exposure to Canadian companies with growth characteristics.

The WisdomTree Emerging Markets Dividend Index ETF (EMV.B), which has a 0.38% management fee, focuses on emerging market stocks that meet minimum listing, market cap and liquidity requirements. Finally, the WisdomTree US MidCap Dividend Index ETF (UMI and UMI.B), with fees of 0.38% for hedged units and 0.35% for non-hedged units, focuses on mid-cap US companies.

Managed ETF portfolios making waves in the market

As the increasing diversity of ETFs threatens to overwhelm investors, centrally managed ETF portfolios are growing in popularity. According to the

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Wall Street Journal, such portfolios accounted for as much as 12% of BlackRock’s US$150 billion in ETF revenue this year, as of the end of July.

Morningstar has reported that around US$100 billion is held in strategies that are at least 50% invested in ETFs; however, that excludes certain large firms – Wells Fargo counts US$20 billion in managed ETF portfolios, while Merrill Lynch has more than US$50 billion.

ETF investment by institutional players is on the rise

A recent report from ETFGI has revealed an uptick in the amount of institutional investment going to ETFs. Looking at regulatory filings from more than 70 countries, the firm found that 4,450 institutional investors and more than 8,000 mutual funds owned at least one ETF last year. Merrill Lynch was the largest institutional investor, holding US$100 billion in ETFs. Wells Fargo, Morgan Stanley, Goldman Sachs, UBS, BMO, JPMorgan and Citigroup had a combined US$256 billion. Four hedge funds – Passport Capital, Citadel, Two Sigma and Parallax Volatility Advisers – accounted for another US$1 billion.

Are smart-beta ETFs starting to lose their lustre?

Smart-beta ETFs have been all the rage in recent years, but they are beginning to decelerate compared to their passive peers. According to Morningstar data, strategic beta’s share of index funds increased from 13.4% to 16.6% between July 2012 and July 2015, growing more than twice as fast as market-cap-weighted funds. However, cap-weighted funds saw inflows of US$605 billion over the two years ending July 31; during that same period, strategic beta collected just US$117 billion. Strategic beta now accounts for 16.2% of index funds.

How to dig for global gems A global asset manager describes the mechanics behind a new international dividend ETF Canadians, like investors in many countries, are known to have a strong preference for domestic markets. But by overcoming this prejudice, investors can open their portfolios to returns from a wider variety of sources.

“In addition to added diversification, investing globally provides exposure to a much broader opportunity set of businesses around the world,” says Stephen Groff, principal and portfolio manager at Cambridge Global Asset Management. Groff is the lead portfolio manager for the First Asset Cambridge Global Dividend ETF, a TSX-listed offering that has both hedged (FCW) and unhedged (FCW.B) units.

The actively managed ETF provides exposure to equity and equity-related securities issued by businesses around the world.

But simply expanding the geographic area isn’t enough to guarantee improved returns versus a Canada-only philosophy.

“Our fundamental due diligence process focuses on the quality of the business, its competitive advantages, capital allocation priorities and valuation to determine if it is an attractive investment for this strategy,” Groff says.

Addressing many Canadians’ need for income, the ETF seeks to provide returns not just from capital gains, but also from dividend income. The strategy Cambridge applies goes beyond dividend yield, however; it looks at a company’s health and ability to invest funds back into the business, both of

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which are tied to how well it can sustain and grow dividends over time.

“We try to balance the desire for current income in the form of dividends with the need for that business to reinvest and ensure their competitive advantage remains intact,” Groff says.

Another issue when it comes to dividend

“Investing globally provides exposure to a much broader opportunity set of businesses around the world” investing is overexposure to a specific market or market segment. While it’s tempting for active managers to concentrate assets into the areas with the most attractive returns, those have to be weighed against regional risks. While many active managers protect against this by setting caps on exposures, First Asset’s global dividend ETF takes a more nuanced approach.

“We are continually rebalancing the portfolio to reflect our best ideas – where we see the best risk-adjusted return potential,” Groff says. “We do not set hard limits on geographic exposure, but instead continually monitor to ensure the portfolio is properly diversified.”

That diversification also applies to sector allocations. As of September, the fund has exposure to nine distinct sectors.

“We feel that our flexible approach will lead to better risk-adjusted returns over the long term,” Groff says, “as we can be opportunistic and capitalize on market inefficiencies across a firm’s capital structure.”

Q&A

Christopher Doll VP and head of product and business strategy, PowerShares INVESCO CANADA

Years in the industry 15 Fast fact Invesco recently launched two new ETFs: the PowerShares 1-10 Year Laddered Investment Grade Corporate Bond Index ETF (PIB) and the PowerShares S&P/TSX REIT Income Index ETF (REIT)

New incomeoriented ETFs PIB the fourth ETF Invesco has launched on the NEO Exchange and the first laddered corporate bond ETF to launch there. What benefits can PIB offer investors?

PIB joins DWG, UHD and GHD on the NEO Exchange. Invesco was the first company to launch on this exchange in March 2016, and our goal was to provide greater efficiency and cost savings for investors. We are pleased to be adding another NEO-listed product to our lineup as we continue to implement our multi-venue listing strategy.

PIB provides exposure to diversified core Canadian investmentgrade corporate bonds through a laddered structure designed to reduce reinvestment risk. By selecting investment-grade corporate bonds, investors may earn higher yields relative to a portfolio of government bonds with similar terms, or a blended portfolio of government and corporate bonds.

Meanwhile, on the TSX, REIT is Invesco’s first real-estateoriented ETF in Canada. What factors enabled you to bring this product to market?

As investors enter retirement, there is a growing need for investments that can help provide both income and growth potential. With low interest rates, investors have looked to diversify their sources of income, turning away from bonds to other asset classes, including real estate. REITs offer predictable, recurring cash flow and attractive yields compared to other sectors of the S&P/TSX Composite Index. REITs also offer potential diversification benefits to a portfolio, due to their historically low correlation to certain major asset classes. This may result in potentially higher risk-adjusted returns.

What features make REIT a competitive offering relative to other real estate ETFs on the TSX? REIT is unique from other ETFs in the same space because it employs a different approach to selecting and weighting securities within the portfolio. By looking at companies with a three-year track record of paying income distributions, in conjunction with selecting companies with the lowest volatility of those distributions, the portfolio is tilted toward companies that exhibit signs of strong financial health.

Additionally, REIT offers investors a competitive price point when compared to the majority of assets in real estate ETFs in Canada.

The Bank of Canada is moving in a hawkish direction, and some have projected the overnight rate will reach as high as 1.5% by the end of 2018. How do you think that will affect the performance of PIB and REIT in the months ahead?

With any interest-rate-sensitive asset class, rising rates will likely have a negative effect on the price of the securities. In the case of both PIB and REIT, an increase in short-term rates will have some impact on the portfolio, but the values of the underlying securities will be more sensitive to movements in five- and 10-year Government of Canada bonds.

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UPFRONT

ALTERNATIVE INVESTMENT UPDATE

Startup investment firm bites into bitcoin Investors can now get exposure to cryptocurrency without having to deal with its complexities

monitored by any regulatory body, so even sending information to start a trading account can feel unsafe. Currently, no Canadian bank will deal with bitcoin exchanges, which means topping up a trading account involves wiring money to unfamiliar jurisdictions like Malaysia, Poland or Gibraltar. And the private key assigned to each trading account must be kept in a mobile digital wallet, which is tantamount to holding as much as $25,000 on your phone.

“Purchasing bitcoin directly is fraught with complications and technical components – and risks”

Long regarded as a niche, speculative investment vehicle, cryptocurrencies are getting increased attention from investors around the world – including in Canada. According to Sean Clark, co-founder and general partner at startup investment firm First Block Capital, “2017 has been a breakout year for cryptocurrency.”

Clark, along with partner Mark van der Chijs and a team of other finance and technology experts, has taken the first step in

NEWS BRIEFS

making cryptocurrency more accessible to Canadians with the FBC Bitcoin Trust, Canada’s first registered cryptocurrency fund.

The trust provides exposure for funds, family offices and high-net-worth clients who want to own bitcoin without worrying about how to buy it, pay for it and store it.

“Purchasing bitcoin directly is fraught with complications and technical components – and risks,” Clark says. He explains that existing bitcoin exchanges around the world are not

Export Development launches first CAD green bond

Export Development Canada [EDC] has priced its first green bond issued in Canadian dollars, the $500 million 1.80% Fixed Rate Green Bond. “Being the first Canadian Crown corporation to issue a Green Bond in CAD demonstrates the increasing demand for sustainable investment products within the Canadian market,” said EDC’s Ken Kember. Proceeds will go toward green assets, including loans made to companies involved in renewable energy, soil and water remediation, and climate-change solutions.

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FBC is able to take on those risks through a partnership van der Chijs formed with Xapo, “the Fort Knox of bitcoin,” which acts as the brokerage, trader and custodian for the FBC cryptocurrency fund’s bitcoin assets.

According to Clark, Xapo keeps its bitcoins on cold-storage servers in three separate locations around the world, one of which is in an underground ex-military bunker in Switzerland.

Aside from security, the fund provides investors with access to added scale. “Anyone who really wants to take a major position and put 1% of their AUM into bitcoin can’t buy large quantities,” Clark says. “We can process $50 million worth of subscriptions a day and not move the market.”

Agellan REIT internalizes asset management team

Agellan Commercial Real Estate Investment Trust has entered into an agreement with its external asset manager, Agellan Capital Partners, to internalize the REIT’s asset management function. The transaction is expected to close during the fourth quarter, subject to customary closing conditions. Upon closing, Agellan Capital Partners is entitled to an aggregate consideration of $15 million, including $3 million in cash and the rest through an issuance of about 1 million exchangeable Class B LP units.

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Q&A

Ray Carroll

Quantitative investing gets a global boost

CEO and chief investment officer BRETON HILL CAPITAL

Years in the industry 19 Fast fact Breton Hill Capital will soon become part of global investment manager Neuberger Berman, which manages US$271 billion in client assets

What advantages do your quantitative strategies offer over other approaches?

I think there are three things. One is people: I think nowadays quantitative strategies can be overly academic, and I think we’ve done well marrying market experience with academic training. Our team has a number of PhDs, including myself, in applied math, neuroscience and experimental physics. At the same time, the other portfolio managers and I average about 20 years of experience in trading and risk management, so it makes a big difference between doing research from a textbook versus living through events like the 2008 financial crisis.

The second thing that I think differentiates us is that we are multi-asset-class. I spent part of my early career working with my colleague Frank Maeba in the currency and commodity markets, so it’s not just about equities.

We can be long and short across multiple asset classes, all in the same fund.

Third, whenever we launched a fund, it’s because we think there’s a problem without an existing solution. We launched a dividend fund in Canada because we really thought we had a different view on sector risk diversification and country diversification, position-sizing, and stock-picking. That principle really extends through from the long-only funds to our absolute-return strategies.

What kinds of returns have Breton Hill’s quantitative strategies generated for investors?

Our firm was founded in 2011 with a seed investment from CALPERS, which is the biggest US public pension

New institutional private debt pool comes to CIBC

CIBC has launched the CIBC Long-Term Private Debt Pool, established to meet the needs of investors looking for contracted cash flows that align with their liabilities. According to CIBC’s Doug MacDonald, the new product has the potential for an improved yield without incremental credit risk. The pool is focused on private debt securities from unrated infrastructure and power firms, which CIBC identifies through a robust and established research process, as well as long-term relationships with private debt players.

plan. In Canada, all of our investors are retail and invest through our partnership with Purpose Investments, which has been in place since that firm first launched. The very first fund we launched with Purpose was a dividend fund, which has done really well; it now has assets over $500 million and has annualized returns at around 11%.

On the alternatives side, we did a really interesting options strategy about a year and a half ago. The fund is designed to generate income with exceptionally low volatility, and it’s done exactly that; it’s returned about 4% with low volatility – lower than the bond volatility, actually.

How do you expect your acquisition by Neuberger Berman to enhance your investing capabilities?

There are two big advantages. First is on the data science side. Inside Neuberger Berman, we’ll have access to a very large Big Data initiative. That means gathering alternative data sets on things like credit-card transactions, which really require scale and capital to obtain. I think that will really give us a competitive edge, particularly in forecasting companies’ health in advance of their filings.

The other big one is ‘quantimental’ research. I think we have really good quantitative capabilities, and Neuberger’s really known for its deep fundamentals.

There’s a huge opportunity to incorporate inputs from their fundamental team into our quantitative processes. We’ve been working on a project with them for a while now, and I think it looks really promising.

HIVE Blockchain acquires second data centre

HIVE Blockchain Technologies has announced a plan to acquire a second cryptocurrency mining data centre located in Reykjanes, Iceland. The second data centre will be acquired from Genesis Mining, a 30% shareholder of the firm, for a consideration of $5 million and 2 million common shares of HIVE. Genesis has the option to subscribe to additional shares of HIVE to maintain its 30% ownership.

The move is expected to increase HIVE’s cryptocurrency mining capacity by more than 70%.

Mackenzie lowers private wealth pool minimum

Mackenzie Investments has lowered the minimum investment required for all Mackenzie Private Wealth Pools from $150,000 to $100,000; the minimum is waived for households with assets over $250,000 invested with Mackenzie. For six of the pools, strategies were changed to include active currency management and dedicated tactical asset allocation to take advantage of market opportunities. Alain Bergeron, head of the Mackenzie Asset Allocation Team, has been appointed as lead manager of those six pools.

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UPFRONT

HEALTH INSURANCE UPDATE NEWS BRIEFS Despite high spending, Canada lacks health resources

A new study from the Fraser Institute suggests that despite being a point of pride for Canadians, the country’s public health system isn’t delivering the level of care they’re paying for. The report compared 29 universal healthcare systems in developed countries; researchers found that in 2015, Canada spent 10.6% of its GDP on healthcare, outpaced by only Switzerland (11.9%) and France (10.7%). However, the Canadian healthcare system ranked poorly on several indicators of resource availability, ranking 25th for number of physicians, last in the number of acute-care beds and 20th for availability of MRI scanners.

Tax proposals could cause problems for provincial plans

Ottawa is facing a backlash from doctors against its proposed crackdown on tax sheltering through private corporations; physicians argue that a tax hit on them could have a much larger impact than on other professions. Every year, provinces negotiate with the doctors’ association in their jurisdiction to settle on rates for procedures and services, according the National Post. During such discussions, the substantial income tax breaks granted to doctors have occasionally been used as a basis for agreements to not raise those rates. Should that advantage disappear, doctors argue that they may have to recoup their losses by increasing fees.

Nurse helps patients get generic HIVpreventing drugs

A registered nurse has revealed himself as the anonymous man behind a website that helps gay and bisexual men get generic anti-HIV medication from the US. According to news outlet Vice, before

he set up the Davie Buyers Club website last year, Alex Smith was working at a Vancouver-based HIV/STI testing clinic; many patients pleaded with him for access to a type of drug known as preexposure prophylaxis, or PrEP, which can cost $1,000 a month in Canada, while imported generics cost as little as $45 monthly. Smith’s site has helped around 200 people gain access to generic PrEP.

Manulife expands options for group claims submissions

Manulife Financial is now allowing members of its group benefits plans to submit any claims, including disability claims, through a new homepage and mobile app. Manulife Mobile, which is available for iPhone and Android devices, also lets users review recent claims and payment information, see their benefit balances, and access their benefits card. “The newly designed plan member homepage brings the most important information to the forefront, where plan members can easily and efficiently transact with Manulife in the way they want to,” said Donna Carbell, Manulife’s senior vice-president for group benefits.

CLHIA applauds transparency from Quebec’s pharmacies

The Canadian Life and Health Insurance Association [CLHIA] has expressed its support for a new legal provision requiring more transparency from pharmacies issuing prescription drugs in Quebec. Pharmacies in the province are now required to provide a more detailed invoice that itemizes the price of the medication, the wholesaler’s margin and the pharmacist’s fee. “[Drug costs are] a significant expense, and it became clear that plan members needed to be better informed so that they could make sound choices,” said CLHIA president Lyne Duhaime.

Universal coverage a real possibility The healthcare debate in the US has put the pros and cons of Canada’s system in the spotlight Canada’s demographic shift means the country’s healthcare system is in need of a refresh, according to Queen’s University academic Dr. Chris Simpson. As US Senator and former presidential candidate Bernie Sanders continues to advocate for universal coverage in the US, Canada’s mixed public-private healthcare has come under the spotlight.

Canada’s current healthcare system dates back to the 1960s, when the provinces followed the model devised by Saskatchewan premier Tommy Douglas. Sanders’ supporters have used Canada as an example for the US to follow, while opponents have pointed out the flaws in government plans, particularly long wait times. In Simpson’s view, there is much to admire about the Canadian system, but also much that can be improved upon.

“I think a lot of the arguments from American lawmakers are simplistic,” he says.

“The famous video of Dr. Danielle Martin taking on the US senator [Richard Burr] – his arguments were very amateurish and designed as red meat for his base. The reality is, we need far more sophisticated arguments than that.”

Critics of government-funded plans argue that long wait times put the public’s health at risk, but this argument ignores the fact that for emergencies, there are few countries with better care than Canada, Simpson explains.

“There is no question that access and wait times are the Achilles’ heel of our system,” he

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says. “What’s often lost in that argument is that if you have an urgent problem, there may well be no better place than Canada to have your care. You will get it very quickly, and you will get world-class care.”

In a recent paper, the Queen’s University

prospect of government-sponsored drug plans looks increasingly likely.

“We are probably closer than we ever have been, and there seems to be more credible economic analysis floating around,” Simpson says. “What I worry about are the some of

“If you have an urgent problem, there may well be no better place than Canada to have your care. You will get it very quickly, and you will get world-class care” School of Policy Studies Health Policy Council identified potential efficiency improvements for Canadian healthcare. As one of the study’s authors, Simpson believes a strengthening economy means reform is more achievable.

A national pharmacare plan is often cited as a first point of action; in Simpson’s view, the

the new drugs coming down the pipeline – biologics and some of these extraordinarily expensive drugs.”

While certain segments of the population currently receive drugs through a government plan, the majority of people rely on their employer’s group plan or pay out of their

own pocket. It’s a considerable expense – and something policymakers need to address, Simpson says.

“We haven’t gotten together and created a larger bargaining unit,” he says. “If you take New Zealand as an example, they have been able to get prices right down. In Canada, the Council of the Federation has made some progress on bulk purchases. Critics say it impedes innovation and will drive the drug companies out, so it’s a double-edged sword.”

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UPFRONT

LIFE INSURANCE UPDATE

BC lays down law on third-party sales The province’s insurance regulator is cracking down on life insurance sold through exempt channels

The reason we issued that bulletin was precisely because we had concerns over insurers’ oversight and control over distribution. That includes insufficient training, aggressive sales practices and inadequate disclosures.”

In the case of the Western Life Assurance group creditor insurance being sold by the two payday lenders, the regulator found a litany of violations. During its investigation, the

“We had concerns over ... insufficient training, aggressive sales practices and inadequate disclosures”

British Columbia’s insurance regulator has warned life insurance providers that deceptive sales practices in the industry will be weeded out. This follows an order issued to Western Life Assurance by the Financial Institutions Commission to stop selling policies through two payday lenders.

Western said in a statement that it would fully comply with the terms laid out by the regulator. Those terms mean the firm will no longer sell group creditor insurance in the province through the two lenders, Venue Financial and Cashco Financial, and will provide refunds

NEWS BRIEFS

to the customers that were misled.

According to Chris Carter, deputy superintendent of the Financial Institutions Commission, the issue of insurance being sold through third parties has been a focus for the regulator for some time now.

“In September 2015, we issued a bulletin of expectations regarding insurers’ oversight and control over distribution through coexempt sellers,” he said. “Payday lenders are one avenue; mortgage brokers are another, but there are a variety of different ways insurance can be distributed through exempt channels.

Manulife hit by potential $5 million lawsuit

The Toronto Transit Commission is suing Manulife Financial for up to $5 million in damages. This latest development is part of an ongoing saga concerning employee benefits fraud between the insurance giant and the TTC. TTC’s statement of claim alleges negligence and breach of contract by Manulife, saying that “Manulife employed incompetent managers, employees and contractors ... so that systems and procedures were inadequate in all of the circumstances for the purpose of preventing and detecting fraud.”

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commission discovered that consumers were not made aware that the insurance was voluntary, and some were not even informed they had been signed up.

“Consumers weren’t placed in a position to make an informed decision,” Carter said.

“There are certain eligibility requirements for the insurance, and eligibility wasn’t discussed with consumers either, which means some were signed up for insurance they didn’t qualify for, which wouldn’t be available for them when they most need it.”

On top of that, legally required disclosures weren’t provided to consumers, so most weren’t aware of policy terms or even who the insurer was. Responding to the regulator’s order, Western Life president Louise Mitchell vowed to address the oversight.

Dynacare’s HooperHolmes acquisition to benefit advisors

In September, health and wellness solutions firm Dynacare Insurance Services acquired Hooper-Holmes Canada, one of the country’s largest independent paramedical service providers to the life insurance industry. By buying one of its closest competitors, Dynacare says brokers will ultimately benefit through more efficient, wide-ranging services. “With [deeper] resources, we can deploy a better experience for the applicant, drive paper out and improve the turnaround times for applications,” said Dynacare VP Neil D’Cruz.

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Q&A

Andrea Zviedris

Complaints to life and health watchdog soar

Communications manager OMBUDSERVICE FOR LIFE & HEALTH INSURANCE [OLHI]

Years in the industry 15 Fast fact The OLHI’s 2016-2017 annual report revealed that complaint volumes increased by 23.2% across Canada, an all-time high

Consumer complaints to the OLHI are at an all-time high. From your perspective, is that a positive or negative?

We think that is a positive. What it shows is that we have an increased profile, and that explains the rise in complaints. Canadians are hearing more about us in the news and are visiting our website more often. We saw a 19% increase in traffic to our site in the past year.

Also, member companies and their advisors are an important source for us. They are telling their clients about our services as part of their internal complaints processes. That gives clients an extra place to turn to for help with complaints.

What is the process when a person has a complaint about insurance coverage?

When we receive a complaint, often we find that the insurance company has made the right decision. In those cases, the consumer is calling us so we can explain why the insurance company made the decision it made. Also, often when they call us, it is before they have completed the insurance company’s internal complaints process, so we walk them through that process and how to request a final position from the insurance company.

Often we don’t hear back from the consumer, as it was resolved at the company level. Even though we might get 2,600+ complaints in a year, a lot of those haven’t gone through the internal process with the company.

Life insurance still in the “dark ages,” says Manulife CEO

Incoming Manulife CEO Roy Gori has identified modernization as a key goal for the company under his leadership.

Speaking at the recent Scotiabank Financials Summit in Toronto, Gori said the life insurance industry still exists in “the dark ages” in comparison to many other sectors.

“If you apply for an insurance product, you’ll get a 16-page application form with 120 questions more often than not,” he said. “It’s still very paper-based, very manual, and as a result, our industry net promoter scores are really very poor.”

What are the most common complaints?

More than half of complaints – about 57% – are related to denied claims. That can be disability, life, or employee healthcare and dental – those are the top three products where we see complaints.

When someone is refused a claim, how does the OLHI help?

Consumers can reach us online through our Submit Complaint tool. It’s three-step process where they fill out a quick questionnaire. They also fill out an authorization form, which gives us permission to work with them, and then we reach out to the insurance company and ask for all the information related to the complaint – letters, medical reports, etc.

What is the OLHI’s relationship with insurance companies?

Our relationship is quite collaborative, but we are independent and impartial. By ‘collaborative,’ I mean we can reach out to companies and get all the documents needed to review a case and find out if there is any merit to proceed with making a recommendation.

If a person buys insurance through a financial advisor, how does the complaint process work?

If a client goes to an advisor first, they can point them in our direction, either through our call centre or through our website – from there, we will be able to help the consumer.

M&As still an option for Great-West amid restructuring

While reducing costs is a key part of Great-West Life’s ongoing restructuring, the firm hasn’t ruled out M&As. At the Scotiabank Financials Summit in Toronto, Great-West president and CEO Paul Mahon said that while he expects M&A activity to slow, the company won’t be foregoing it altogether, as its recent purchase of Financial Horizons Group attests. “We really believe in advice distribution in Canada, so we wanted that acquisition,” Mahon said.

“We think it is more valuable to us than it was to the prior shareholder.”

Church confronts insurer over life policy rate increase

A US-based church is accusing an insurance company of using race as a basis to raise rates on old policies that cover its churchgoers. According to the Wall Street Journal, in 2004, LA-based Praises of Zion Baptist Church got help from investors to take out policies for 2,400 churchgoers. In 2013, Transamerica Life Insurance Co., the company that sold them the policies, raised the rates by 50%, effectively adding $100 million to policy costs. The church alleges the rate hike was made based on racial data.

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UPFRONT

OPINION

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

The case for certification Lack of trust is leading Canadians to forgo muchneeded financial advice, writes Cary List, but there is a way for the industry to build credibility THERE ARE countless reasons why Canadians need financial guidance more than ever. Personal debt levels are the highest in history, baby boomers are getting squeezed on both sides (from supporting their kids to supporting their aging parents), millennials have none of the financial and economic certainty of their parents’ generation, and the social safety net is eroding.

Yet even amidst all these challenges, too many Canadians are not getting the financial guidance they need, and there’s good reason.

Many Canadians fear that anyone they turn to for professional advice will end up selling them products they don’t understand and/or need. And many leave their interactions with advisors no more confident in their financial future than when they came in.

According to an FPSC study, the number-one factor preventing Canadians from seeking the financial help they need is lack of trust. Too often, the expectation of poor advice has led Canadians to seek no advice at all, and society is paying for it. So how does an industry that has lost the trust of its clients gain it back? How do advisors rebuild the confidence that has been lost?

The financial services industry was built on products and then slowly evolved into siloed advice on investments, insurance, credit, etc., mostly all still focused on product-category solutions. This view of the world created a large number of silos among advisors.

The problem is that Canadians’ lives aren’t divided into neatly packaged, mutually exclusive segments. Most people’s needs, goals and priorities overlap all aspects of their lives,

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and solutions can’t be found in isolation.

That’s where financial planners come in.

In fact, the Certified Financial Planner designation was introduced to Canada to fill this gaping hole, creating a group of highly skilled professionals who are trained to handle the integrated holistic financial planning needs

cation. Anyone, regardless of qualification, is permitted to use the title. And thousands do. Thus, instead of gaining the trust of consumers through high professional standards and clear-cut designations, we continue to have an environment where trust is diminished through lack of clear, consistent standards and title restrictions, which would ensure accountability.

The term ‘financial planning’ is too often used as a sales pitch, and the title ‘financial planner’ is used haphazardly throughout the industry. The majority of those who imply through title and/or advertising that they are financial planners are in fact licensed and qualified only to give advice relating to product recommendations or purchase.

However, expertise in product advice does not equate to competence in financial planning.

So would-be clients remain confused and at risk. They expect, and have a right to expect, that anyone holding themselves out

“Too often, the expectation of poor advice has led Canadians to seek no advice at all, and society is paying for it” specific to Canadians. CFP professionals are the women and men who are trained to see the big picture, to see their clients’ needs in an integrated fashion, and to understand the interdependencies and implications that a financial decision will have on a client’s entire financial health.

CFP professionals have to demonstrate their competence based on the highest standard for the profession. In order to achieve the designation, they must have successfully completed a core curriculum program and approved capstone course, pass two examinations, and demonstrate that they have completed three years of qualifying work experience. Once certified, CFP professionals must also annually attest to upholding the standards, including a continuing education requirement, and agree to be held accountable to FPSC for their actions.

Sounds good, right? But there’s a catch.

The title ‘financial planner’ isn’t restricted based on appropriate professional certifi-

as a financial planner is qualified, competent, ethical and accountable to the public. For financial planners to be seen as true professionals, we need to ensure that the title is restricted for use exclusively by those who have earned it and who are willing to be held accountable to the standards expected of a true professional.

Governments must act to codify in law the professional certification structure, governance and oversight mechanisms that will ensure all who wish to claim financial planning as their field are made to live up to the standards, as CFP professionals do today.

Only then will Canadians be assured that when they seek out the advice of a financial planner, they are in good hands.

Cary List leads the Financial Planning Standards Council as the premier standardssetter for the financial planning profession in Canada. FPSC’s purpose is to drive value and instil confidence in financial planning.

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INNOVATION ADVOCACY ACTIVE

THIS IS DYNAMIC LEADERSHIP.™

Dynamic leadership is the courage to step forward and innovate, the resolve to overcome with advocacy and the determination to lead when it comes to active investing.

See what makes Dynamic Funds a leader.

dynamic.ca/leadership

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Dynamic Funds® is a registered trademark of its owner, used under license, and a division of 1832 Asset Management L.P. ™Trademark of its owner, used under license.

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20/10/2017 2:27:45 AM

PEOPLE

INDUSTRY ICON

LEADING THE DIGITAL REVOLUTION Sun Life Financial president and CEO Dean Connor outlines how his company has emerged as an innovation leader in financial services

IN BUSINESS, constant evolution is a necessity. A failure to move with the times isn’t an accusation that can easily be levelled at Sun Life Financial, however. The life insurance sector isn’t best known for innovation, but that reputation is slowly shifting, according to Sun Life president and CEO Dean Connor. He believes his firm has really emerged as an agent of change in the sector, especially in 2017.

“I think what is missed when people comment on that is all the innovations we have created,” Connor says. “I think Sun Life is at the forefront of what is going on in the world, and we as Canadians should be proud of what we have here.”

Moving forward This September, Sun Life Financial unveiled its new global headquarters in Toronto, a state-of-the-art digital hub that emphasizes sustainability. It’s an impressive structure – the huge Sun Life Financial sign on its façade is immediately recognizable to anyone landing at nearby Billy Bishop Airport. But much more than a high-end place to work, it’s a symbol of where Connor and the Sun Life leadership see the company heading.

“We have rolled out a mobile app that is the first of its kind for group benefits and pensions,” Connor says. “You can take a picture of your group claim receipt, submit it, it is real-time adjudicated, and the money

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is in your bank account in 24 hours.”

Another addition is the company’s provider search lookup, which launched last fall and recently crossed more than 2 million ratings in Canada, as well as its Digital Benefits Assistant, a client engagement platform launched in 2016. Using technology to enhance convenience for consumers is the focal point of the platform, Connor says.

“It started with the realization that Sun

year in Canada, over 1 million a week, and we use all that data to help Canadians get more from their benefits plan,” Connor says.

“Ultimately, we will take the Digital Benefits Assistant over to the retail world for wealth and insurance.”

A program that offers such guidance might sound like cause for concern among advisors – after all, the limits of artificial intelligence are still very much a mystery.

“I think what is missed ... is all the innovations we have created. I think Sun Life is at the forefront of what is going on in the world, and we as Canadians should be proud of what we have here” Life is the single largest private-sector payer of healthcare in Canada – $8 billion a year for pharmaceuticals, semi-private hospital, out-of-country medical, dental and so on,” he says.

The company has since added to the capability of the Digital Benefits Assistant with its Ella offering, which uses advanced analytics and Big Data technology to provide advice for clients at key life moments.

“We are building a business to use all our data; we process 60 million health claims a

According to the Connor, however, these digital platforms represent an opportunity rather than a threat.

“It’s not to replace advisors; it’s to supplement what advisors do,” he says. “It is responsive to the point that clients raise, which is ‘I don’t see my advisor enough.’

This doesn’t replace the face-to-face, but if you have a savings plan for retirement, when you apply the digital assistant, it will nudge people and help them get to their goals.

Ella takes all of that and adds a voice and

www.wealthprofessional.ca

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20/10/2017 3:19:25 AM

PROFILE Name: Dean Connor Title: President and CEO Company: Sun Life Financial Based in: Toronto Years in the industry: 39 Fast fact: Connor joined Sun Life following a 28-year stint at Mercer Human Resource Consulting, where he oversaw business operations in the US, Latin America and Canada

www.wealthprofessional.ca

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20/10/2017 3:19:28 AM

PEOPLE

INDUSTRY ICON

personality, so it’s not just a text message you receive.”

Allowing a program like Ella to handle the minutiae of financial planning, Connor explains, means freeing up more time for the most important parts of the job, which will enable advisors to increase their value prop­ osition to clients.

“If I were a young advisor today coming into the business, I would be all over this,” he says. “If there is stuff they don’t like to do,

cool line. But if we can be more predictive and personalized and reach out to people at the right moments in their lives, we can really help them.”

Established in 1865, Sun Life Financial now has operations in Canada, the US, the UK, Ireland, Hong Kong, the Philippines, Japan, Indonesia, India, China, Australia, Singapore, Vietnam, Malaysia and Bermuda. Although insurance remains the bedrock of its business, wealth management

“It’s finding the right line on how to use your data. It’s the line between creepy and cool, and we have spent time making sure we stay on the right side of the cool line. But if we can be more predictive and personalized and reach out to people at the right moments in their lives, we can really help them” like asking underwriting questions about health or processing address changes, they can now do that digitally. An advisor can use the Digital Planning Assistant to tell them when to call a client, such as after the birth of a child.”

Digital enhancement Predictive analytics will be a central pillar of the life and health insurance industry in the future, and it’s clearly a priority for Sun Life. In Connor’s view, his company is the industry leader on Big Data, but that does present its own set of challenges.

“It’s finding the right line on how to use your data,” he says. “It’s the line between creepy and cool, and we have spent time making sure we stay on the right side of the

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has been steadily increasing in significance – total wealth sales grew by 12% in the last quarter. It’s clear that digital offerings will be central to the firm’s evolution, both in insurance and wealth. Regardless, Connor confirms that Sun Life is fully committed to the distribution model that has served it so well up until this point.

“When you look at purely digital compa­ nies, they start out purely digital and then add bricks and mortar,” he says. “Amazon has bought Whole Foods; Frank & Oak has opened stores. We started with our equiva­ lent of bricks and mortar – advisors – and now we are adding digital. I think all these predictive personality tools will do two things: increase the demand for advisors and increase their productivity.”

A MEMORABLE MONTH FOR SUN LIFE

SEPTEMBER 7 Sun Life Global Investments announced a deal to purchase all of the outstanding shares of both Excel Funds Management and Excel Investment Counsel; the acquisition will make SLGI a leader in emerging market funds in Canada.

SEPTEMBER 12 Sun Life introduced Ella, an AIenabled interactive digital coach designed to help clients navigate and maximize their benefits and pension plans.

SEPTEMBER 13 The company unveiled its new global headquarters building in Toronto, which will house more than 2,000 employees over 17 floors, and was designed to achieve Leadership in Energy and Environmental Design [LEED] Platinum certification.

www.wealthprofessional.ca

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20/10/2017 3:19:30 AM

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Commissions, trailing commissions, management fees and expenses may all be associated with mutual fund investments. The indicated rates of return are the historical annual compounded total returns, including changes in security values and reinvestment of all distributions, and do not take into account sales, redemption, distribution or optional charges, or income taxes payable by any securityholder, which would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Please read the prospectus before investing. Copies are available from your advisor or Invesco Canada Ltd. Series F is available only to eligible investors who have fee-based accounts with their dealer and whose dealer has signed an Invesco Series F dealer agreement with Invesco Canada. Sales charges and trailing commissions are not payable for Series F units/shares; however, investors may pay other fees to their dealer for investment advice and other services. The performance of other series will differ due to fees and expenses. † Inception date is January 12, 2011.

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20/10/2017 3:19:34 AM

FEATURES

SPECIAL REPORT

OUTSTANDING ADVISORY TEAMS Wealth Professional Canada shines the spotlight on nine leading advisory firms that are staying on top of industry trends and outperforming the competition

THE ROLE of a financial advisor is a different beast in 2017. In the past, the job mainly focused on selling products, whether it was life insurance or mutual funds. Advisors still provide such products, of course, but a lot more is expected these days from those at the top of their profession. Holistic financial planning is what the industry is all about right now, and in order to provide such a service, many advisors elect to pool their resources. Consumers want convenience, and in the realm of financial advice, that usually means receiving a host of services under one roof. All of the teams highlighted here meet this need for their clients, whether it’s in-house or through regular partnerships.

Another major factor that leads advisors to band together is succes-

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sion planning. It’s a major issue for the industry right now, as the advisors who are retiring aren’t being replaced by college graduates in equal numbers. Wealth management is a challenging profession for new entrants to establish themselves in, so where better to learn the ropes than as part of a closely knit team?

Although WPC’s Outstanding Advisory Teams differ in size, all agree that collaboration is a key ingredient to their success. Whether it’s an office of six people or 150, having a helping hand means advisors can focus on the parts of the job they do best. From investment strategy to tax and estate planning, advisors who are part of a team can specialize in a way they couldn’t as a solo practice.

www.wealthprofessional.ca

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20/10/2017 3:20:46 AM

CARING FOR CLIENTS “I don’t have a monopoly on great ideas. I learn from my staff, and they learn from each other.

It allows the business to have a life beyond my time” Rona Birenbaum, Caring for Clients

Toronto, ON Established: 2000 Number of employees: 7 AUM: $180 million Winner of the Award for Best Practice, Independent Advisor Office (Fewer Than 10 Staff ) at this year’s Wealth Professional Awards, Caring for Clients has been in operation since 2000. Now 17 years in, founder Rona Birenbaum credits a strong team spirit as being central to her firm’s success.

“I don’t have a monopoly on great ideas,” she says. “I learn from my staff, and they learn from each other. It allows the business to have a life beyond my time. This is essential because our clients will need us well beyond my planned retirement in 15 or so years.”

Birenbaum refers to Caring for Clients as “my second family,” and that bond has allowed the group to succeed in a highly competitive environment. The firm provides a bespoke service for clients, which Birenbaum believes is what sets it apart.

“The specialists that we recommend depend entirely on the client need,” she says. “Sure, there are the obvious ones like accountants,

lawyers, Realtors and mortgage agents. Less obvious but equally valuable professionals can address a range of client needs: website designers, writers, IT experts, insurance brokers, family law professionals, tutors and renovators/contractors.”

In addition to greater client demands, increased compliance requirements are also putting a burden on industry professionals.

“It’s not pretty – it has cut into our client service time, increased the cost of running the practice significantly, and frankly, taken some of the enjoyment out of our daily work,” Birenbaum says. “If our clients knew the extent of these impacts relative to the incremental benefit to them as our clients, they would be horrified.”

Despite those headaches, financial advice is still a profession that excites Birenbaum and her team. In a time when many larger firms are cutting back on staff, she has added three new members to the team over the past 18 months.

“We have been turning away business regularly this year,” she says. “I am not willing to grow at the expense of serving our existing clients, or at a pace that is beyond what is reasonable for the team to deliver and still love coming to work every day. Once the current team is operating at 90% of their capabilities, I will look to add to the team.”

WPC: Has the focus of your firm changed since it was formed?

Rona Birenbaum: No, we were one of the first firms in Canada to offer fee-for-service financial planning and fee-based wealth management. That model has enabled our unbiased, dedicated, client-centred approach for 17 years now. We’re proud of our track record of steady growth, client retention and client satisfaction.

WPC: Do you believe independent advisory firms have a future?

RB: The future is looking bleaker all the time. If Canadians knew that the independent advisory model is shrinking and potentially at risk of extinction, and they understood the importance of having access to independent advice and service, they would be up in arms. But then again, we Canadians love our banks. The warm, fuzzy feeling one gets by dealing with a bank or bank-owned firm is nice, but there is a trade-off being made that, I think, many Canadians don’t appreciate.

www.wealthprofessional.ca

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20/10/2017 3:20:51 AM

FEATURES

SPECIAL REPORT POLSON BOURBONNIERE DERBY WEALTH MANAGEMENT free retirement experience. Our consistent goal has been to be the preeminent retirement planning firm in the GTA.” To achieve that, the group has installed specialists in a variety of fields, with a Certified Financial Planner, Chartered Investment Manager, Chartered Financial Consultant, Elder Planning Counsellor, Chartered Life Underwriter, Fellow of the Life Management Institute and Certified Executor all on staff. This allows clients to avail themselves of the whole spectrum of financial planning without ever leaving the Polson Bourbonniere Derby office.

“We are in the fortunate position of being able to provide a very comprehensive service offering in-house without the need to consult outside specialists,” Bourbonniere says. “We do, however, work very closely with our clients’ other professional advisors, including lawyers and accountants.”

Markham, ON Established: 1997 Number of employees: 15 Target clients: Retirees and near-retirees AUM: $425 million Celebrating its 20th anniversary this year, Polson Bourbonniere Derby Wealth Management was another award winner at the 2017 Wealth Professional Awards, taking home the award for Best Practice, Independent Advisor Office (10 Staff or More). Looking forward, the firm has ambitious plans for further growth.

“As we are continually in growth mode, the potential for increasing staffing levels is always present,” says partner Paul Bourbonniere. “We are always receptive to buying books of business from retiring advisors, which could also trigger an increase in staff. Decisions related to staffing are driven by service levels, client numbers, technology and profitability.”

Another priority for Polson Bourbonniere

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Derby is ensuring that it remains at the forefront of technical innovation. That requires ongoing investment, but it’s an entirely necessary expense, Bourbonniere explains.

“Like so many other businesses, technology has improved our ability to communicate both internally within the team and externally with clients and suppliers,” he says. “It has improved our access to information and our ability to monitor markets, products and performance. But while technology has allowed us to improve the client experience, it has not replaced our emphasis on personal relationships and service.”

The importance of the advisor-client relationship is a constant in this business. At Polson Bourbonniere Derby, the focus has always been on forming strong bonds that will outlast various market cycles.

“We work with our clients through the long haul, starting in the accumulation years, through retirement and ultimately helping transition wealth to the next generation,” Bourbonniere says. “What we deliver to our clients has been and always will be a worry-

WPC: How has your back-office system changed over the years?

Paul Bourbonniere: Twenty years ago, we were MFDA, but in 2008 we evolved to IIROC registration.

We have made one dealer change in that time, when we moved over to IIROC. Our back-office systems are provided by our dealer and are the tools that allow us to process trades and generate client statements.

WPC: What frustrates you most about the advisory business?

PB: Our tagline is ‘choose to be worry-free,’ and we practice what we preach. We avoid the noise and distractions that can frustrate many advisors and instead concentrate on our business and on our clients. If there is one frustration, it is that there are some bad apples out there that damage the reputation of the industry.

www.wealthprofessional.ca

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20/10/2017 3:20:54 AM

TPC FINANCIAL GROUP specific documents without having to filter through large physical files. This substantially increases our efficiency.”

Contrary to the popular belief that overreaching regulators are making financial advice less efficient, Neal believes compliance is a plus for firms that are already completely transparent. “With our unique value proposition that addresses all aspects of their personal and corporate finances and our flat-fee transparency,” he says, “clients know exactly what they are getting and what they are receiving for their fee.”

Victoria, BC Established: 1991 Number of employees: 12 Target clients: Professionals across Canada (primarily physicians and dentists) In operation since 1991, TPC Financial Group has evolved as an advisory firm over time. At the outset, selling insurance was its primary focus, but this eventually morphed into a complete financial planning model.

“What changed was that we were coming across many professionals who had been sold insurance, and they did not have a need or were in no position to afford that specific policy,” says Adam Neal, an advisor with the firm.

Selling consumers products they don’t actually need might provide short-term results, but it’s not the way to build a business that lasts. TPC Financial observed an industry where the best interests of consumers were not being served, so it made putting clients’ needs first its primary objective.

“Our office provides flat-fee planning for

clients in all stages of their careers,” Neal says.

“We address estate issues, corporate structuring, tax planning, asset allocation, risk management, budgeting, business purchases and much more. Our flat-fee model ensures that there is no question of bias with our recommendations.”

That approach has proven fruitful, and TPC Financial has developed a reputation as one of the leading advisory firms in British Columbia. Today, technological advancements have broadened its reach way beyond BC. “With our location on the West Coast, we can have a meeting with a physician in Ontario who has finished a shift at 7 p.m. while we are still in the office during normal working hours,” Neal says. “This is something our clients enjoy, since they don’t have to take time away from work or wait in traffic to meet their advisor.”

In terms of back-office systems, TPC has embraced the digital age. “Our office has gone paperless for the majority of our processes,” Neal says. “This saves the environment and also allows for greater access to information, as we can index our files and search for

WPC: What are the benefits of working with a team rather than operating a solo practice?

Adam Neal: When operating as a team, you have the resources to call on multiple backgrounds and experiences to provide assistance to a client. A team also acts as a sounding board for internal discussion within an office. In a solo practice, it can be difficult to keep new legislation in context with ongoing recommendations and strategies, but with many different minds coming together to reach a common goal, you stand a greater chance of success in achieving the desired outcome.

WPC: Do you expect to add more employees in the next year?

AN: Yes, we expect to bring on two or three additional advisors before the end of 2017 in order to help with our substantial growth over the last few months. With the new CRM2 disclosure requirements, many people are questioning the value they are receiving from their current advisors. With the ability to provide meaningful value through proven results, we are sticking by our results, and our clients are telling their friends.

www.wealthprofessional.ca

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FEATURES

SPECIAL REPORT THE JMRD WEALTH MANAGEMENT TEAM

London, Waterloo and Toronto, ON Established: 2002 Number of employees: 10 Target clients: Families looking for financial peace of mind AUM: $1 billion+ Part of National Bank Financial, JMRD Wealth Management is one of that institution’s top-performing teams. With assets under management exceeding $1 billion, the practice has identified three primary objectives for clients: preservation of capital, maximizing rates of return and minimizing taxes. Reg Jackson, a portfolio manager with JMRD, is tasked with managing the assets of his clients.

In order to succeed in that role, his team has adopted a simple but effective philosophy.

“We treat client money with respect,” Jackson says. “Guarding your nest egg is our most important task. We also want to make it grow by reducing your investment costs and increasing your after-tax returns.”

Being part of a Big Six bank also brings its own advantages. The JMRD team boasts enviable resources, but it’s the in-office and supplementary services JMRD offers that make it a successful practice.

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“The team has four portfolio managers, two certified investment management analysts and a support staff with many years of experience in the industry,” Jackson says. “The team also utilizes firm resources to complement our strengths. Outside of the firm, JMRD works closely with the rest of the client’s centres of influence, including accountants, lawyers and insurance professionals.”

JMRD has plans to increase its numbers, but the challenge is finding the right talent.

Bringing young advisors into the business is a process that requires patience many firms don’t appear to have. This isn’t the case with the JMRD team, Jackson explains.

“This past summer, we had students working with us at each of our offices,” he says.

“The trio worked on individual projects, but also worked on group tasks, including a full assessment of our online presence. Who better to advise on technology than millennials?”

When it comes to compliance, a team managing more than $1 billion in assets can shoulder the financial burden better than most.

In Jackson’s opinion, stringent regulation is entirely necessary in wealth management, so friction between his team and the compliance department is minimal.

“JMRD has always made working with compliance a top priority,” he says. “The team

maintains an open and proactive dialogue with our firm’s entire compliance department.

We consider all things compliance a function of doing business, and a heightened focus on this is welcomed, as it protects investors and advisors.”

When it comes to the parts of the job that aren’t so positive, Jackson says client impatience figures highly on that list. Taking a longterm approach to investing is something most advisors advocate, but sometimes that’s easier said than done.

“What is frustrating is when investors get carried away with either too much fear or too much greed and discard a carefully thought-out financial plan,” he says. “JMRD is not much for preaching, but one thing we promote is to have a plan and stick to the plan.”

WPC: Do you believe independent advisory firms have a future?

Reg Jackson: Independent advisory firms most definitely have a future in Canada. These firms make for a competitive landscape and provide an excellent option for investors looking for a nonbank-owned firm experience. The increase in compliance costs has made it difficult for some of the smaller shops to keep their doors open, which is a shame.

WPC: What are the benefits of working with a team rather than operating a solo practice?

RJ: The greatest advantage of having a team versus a solo practice is having the ability to leverage the strengths of different team members. In today’s fast-paced investment landscape, it is impossible to be a jack of all trades. We have seen improvements in client service, quality of investment advice and a greater level of work-life balance for the team.

www.wealthprofessional.ca

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20/10/2017 3:21:00 AM

DANIELSON GROUP WEALTH MANAGEMENT have become much more selective in taking on new client relationships.”

Consolidation in the wealth management space has led to a sharp decline in the number of independent asset managers and advisory firms over the last decade, thanks to hurdles like increased compliance and maintaining digital platforms. As part of Assante Capital Management, Danielson and his team enjoy independence to run their business as they see fit – something Danielson believes is crucial for the overall health of the industry.

“We feel strongly that independent advisory firms have a g reat f uture,” h e s ays, “because they provide a better platform for delivering integrated and holistic wealth planning advice.”

Vancouver, BC Established: 1994 Number of employees: 9 Target clients: Ultra-high-net-worth families, business owners and entrepreneurs, as well as incorporated medical specialists AUM: $470 million Based in Vancouver, Danielson Group Wealth Management has emerged as one of the leading wealth teams in Western Canada over the past decade. Serving the ultra-high-networth segment, the group has amassed assets under management of $470 million, offering a wide range of financial planning services to its clients.

“Over the last 10 years, we have been expanding our private family office model and building our team of multi-disciplinary specialists for our clients and their families,” says team founder Frank Danielson. “We have also developed proprietary systems and web-based tools to help us deliver a truly integrated wealth and life planning experi-

ence to our clients.”

When dealing with ultra-high-net-worth families, there is no margin for error. For that reason, the Danielson Group relies on professionals who are experts in their field.

“Over the last couple of years, we have added significant capacity on our team to expand our in-house expertise in tax, financial planning and wealth planning,” Danielson says. “We also have developed online tools to allow us to work more collaboratively with clients’ existing professional advisors.”

This approach has proven popular with clients, and with business strong, the team plans to add to its talent pool. “Later in 2018, we are planning to add a financial analyst or associate to our team to help free up time for our senior financial advisors and provide for additional specialization,” Danielson says.

When it comes to the most common bugbear of advisors across Canada – compliance – the Danielson Group believes less is more when it comes to its client base.

“Increased compliance has increased the time required to properly service a client household,” Danielson says. “Therefore, we

WPC: What are the benefits of working with a team rather than operating a solo practice?

Frank Danielson: A teambased business provides more specialized and better integrated wealth planning advice; it also allows clients to benefit from the vast experience of our team members. In addition, there is built-in succession planning for our business, and we can provide more diverse and interesting career pathways to help our team grow.

WPC: What frustrates you most about the advisory business?

FD: Advisors or firms that say they provide fully integrated wealth and life management planning for their clients. Once they onboard the new clients and have transferred all the assets, they don’t follow through on their promise. I would say there is still a lack of transparency around fees for different investment solutions and the level of services provided for these fees.

www.wealthprofessional.ca

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FEATURES

SPECIAL REPORT FAMILY TREE WEALTH MANAGEMENT/ THE ROBY TEAM “At the end of the day, anything that takes advisors away from their responsibilities to clients is far more costly in lost business than the cost of hiring effective people” Ottawa, ON Established: 1987 Number of employees: 3 Target clients: People who feel confused and drowning in a sea of industry complexity and who need help to simplify their financial lives AUM: $71 million The group with the longest tenure out of all of WPC’s Outstanding Advisory Teams, Family Tree Wealth Management has been serving clients for 30 years. Founder Robert Roby elaborates on the key factors that have contributed to his firm’s longevity.

“It goes without saying that a well-oiled team serves the needs of clients in both a timely and effective way,” Roby says. “Advisors who think they can do it all on their own need to revisit this concept because at the end of the day, anything that takes advisors away from their responsibilities to clients is far more costly in lost business than the cost of hiring effective people.”

Part of the Investment Planning Counsel, Family Tree has evolved alongside the advisory business. In 2017, holistic financial planning means offering wealth, tax, estate and insurance solutions for clients, and Family Tree has built its business by relying on experts to

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provide those services.

“One of the foundations of my practice is based on offering clients a collaborative approach by utilizing third-party experts in the areas of estate, insurance, accounting, lifestyle coaching and tax,” Roby says. “By utilizing outside experts, it keeps our costs down and provides unquestionable third-party advice.”

With a three-person team, Family Tree is the type of practice that could suffer greatly from increased regulation and other ancillary costs. In Roby’s opinion, the regulators’ efforts have been both a positive and a negative.

“The good is that compliance is there to ensure advisors are not digging themselves into holes,” he says. “The bad is that compliance is now burdened with so much over-regulation that so much of an advisor’s time is spent trying to keep up with it all.”

Independent practices with long-standing clients are essential to the overall well-being of the advisory space. In Roby’s view, advisory firms outside of the Big Six banks will remain a major part of the industry in the future.

“It’s the only way to ensure that the investing public receives advice that keeps them out of the hands of firms that fail to provide objective products and advice,” he says. “So I hope that independents remain, and I know that there are independents such as IPC Securities, wellfunded and committed to this for the long run.”

Robert Roby, Family Tree Wealth Management/ The Roby Team

WPC: How has technology changed your business?

Robert Roby: I recall the days when I had to write in trades into a log book and client notes by hand. Technology has allowed our practice to become far more efficient [with] a robust website, blogs, workshops, teleconference calls, advanced client information systems, personalized retirement and wealth planning, and more effective and timely client communication systems, along with the ‘good old days’ approach of sending something of relevance in the mail every quarter.

WPC: What frustrates you most about the advisory business?

RR: Our industry is the constant source of focus from regulators as being the bad apples. While changes are needed, and there are some bad advisors, like any industry, I believe that advisors – especially independents with long tenure – are for the most part exceptional.

www.wealthprofessional.ca

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CWP FINANCIAL SERVICES cases for doctors, executives and professionals,” Poole says.

He and his team have high hopes for both CWP and the advisory business in general.

That’s not to say there aren’t challenges, though, one of which is improving the reputation of financial advisors.

“Often I am asked, ‘So, what exactly do you do?’” Poole says. “In the beginning, I used to answer with one of a few stock replies. The truth is, great advisors generally do so much more than simply one or two sentences will ever explain. Until our clients experience several years of working with us, they sometimes still don’t realize everything we do.”

Toronto, ON Established: 2012 Number of employees: 4 Target clients: Business owners, corporate executives and medical professionals AUM: $25 million One of the newer teams featured here, CWP Financial Services, part of Sun Life Financial, has been in operation for just five years. But right from the beginning, founder Chris Poole noticed a great deal of interest in the services his firm was providing.

“Three months into starting life as a financial advisor, we hired our first assistant because we had what felt like three months of paperwork on my desk,” Poole says.

“We’ve been able to expand year-over-year.

A few years ago, we even added an entire secondary market to CWP Financial to support demand from young professionals,

transitioning families and pre-retirees with pensions to transfer throughout Toronto.”

Having a team to rely on allows Poole to focus on CWP’s bread and butter: business owners, corporate executives and medical professionals. Those groups have been the firm’s main focus since its start, although the services provided have changed as CWP has expanded in scope.

“In the beginning, our practice was primarily focused on corporate risk management and business succession strategies that used the eligible advantages found inside certain life and health insurance products,” Poole says.

Today, CWP’s business has shifted to include tax planning, alongside the myriad other financial planning solutions that clients have come to expect in 2017. “We focus our time building tax concepts to shelter and protect corporate capital, run a full group benefits division, manage corporate pension plans, and actively execute complex disability

WPC: Do you intend to add more employees in the next year?

Chris Poole: In the next six months, we are hiring two new staff and intend to follow up with a third in 2018. We’re aiming to add another mutual-fund-licensed administrative assistant, as well as another full-time financial planner. This shift will allow us to promote an existing staff member into a more senior compliance management role. In the past, we’ve found success when hiring multiple staff at the same time.

WPC: How have increased compliance requirements changed your business?

CP: Since CRM2, we’ve moved all of our client accounts into a fee-based model, ensuring that our advisor trailer is right out there in the open. This continues to support our desire to discuss the value our clients will receive from our firm in exchange for that fee. Our clients love how direct we are with them when setting expectations around cost and service.

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FEATURES

SPECIAL REPORT NICOLA WEALTH MANAGEMENT ship and development initiative. This is in addition to the dozen or so back-office staff members we’ve added this year.”

It’s good to see, especially as many of the banks reduce staff numbers. In Sung’s opinion, independent firms like NWM will play a key role in ensuring the sound health of wealth management in the future.

“Independent advisory firms certainly have a future,” he says. “There will always be challenges and threats to and within the industry, but as long as one is able to look at the landscape and understand what differentiates them in the marketplace, there will be space for independent firms to thrive.”

Vancouver, Kelowna and Richmond, BC; Toronto, ON Established: 1994 Number of employees: 151 Target clients: Affluent families, entrepreneurs and professionals AUM: $4.9 billion Nicola Wealth Management, with a staff of 151 people and AUM of just under $5 billion, is at the high end of the scale among WPC’s Outstanding Advisory Teams. It has been a steady climb for the firm to reach that level, as president David Sung outlines.

“NWM started in 1994 as a six-person company with one location in Vancouver,” Sung says. “We now have a team of 27 advisors as part of a 151-person company with four locations across BC and Ontario.”

Such scale means the team has had to increase its service offering to reflect the increased expectations of clients. NWM now boasts an investment services team, which handles new accounts, reporting, billing, processing and trading. An in-house

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portfolio management team, meanwhile, manages the firm’s series of investment pools. The growth of the business also means its compliance requirements are pretty high, although this is something NWM is meeting head-on.

“In 2003, NWM resigned from the MFDA to become our own registered portfolio manager,” Sung says. “We are now registered with the Canadian Securities Administrators as a portfolio manager, investment fund manager and exempt market dealer in a number of provinces. We hold ourselves to a high standard of fiduciary duty and believe in a culture of compliance that requires greater diligence than standard mutual fund dealers.”

Finding the right people to enhance the NWM value proposition is another priority.

“Our team has been growing exponentially, and we have a strategic plan in place that calls for adding more employees – especially advisors looking to develop and grow their skill set – over the next five years,” Sung says. “This year alone, we’ve added three new advisors to the fold and have had three internal candidates enter our mentor-

WPC: Has the focus of your firm changed since it was formed?

David Sung: Our firm was founded on the idea that high-net-worth business owners and their families face complex issues that require more sophisticated solutions. Our focus hasn’t changed; if anything, we have broadened the scope of our solutions to support families as comprehensively as possible.

WPC: How has technology changed your business?

DS: NWM has always been on the leading edge of technology.

We have a 20-person in-house technology department as part of an infrastructure that supports our team of advisors. We have been producing thorough, detailed rate-of-return statements that put us well beyond new CRM2 standards. Additionally, we produce client statements that include historical and projected cash-flow summaries, fiscal reports for clients’ accountants, a private client access website and a new project that provides our advisors with a ‘one-stop’ online dashboard for serving their clients.

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PWM PRIVATE WEALTH COUNSEL “Media spin of what is really happening in markets and financial planning has, at times, made it more difficult to manage clients’ emotions,” he says, “which is one of the keys to making clients successful in our business through rational decision-making.”

Saskatoon, SK Established: 1996 Number of employees: 15 Target clients: High-net-worth business clients, retirees and pre-retirees AUM: $552 million PWM Private Wealth Counsel was formed in 1996, and in the 21 years since, it has been able to amass assets under management of more than $550 million. Kevin Haakensen, who joined PWM in 2008, explains what sets his team apart from its many competitors.

“Client experience and success is the key to creating a successful wealth management firm, and we think that is impossible to do from not only a knowledge and experience perspective, but also from a time management perspective, without having a well-rounded team,” he says.

Another strength of PWM, in Haakensen’s view, is its ability to change with the times.

When the firm started in the mid-’90s, the mutual fund industry in Canada was riding high, so PWM’s focus reflected that. As wealth management evolved, PWM became much more of a financial planning operation, introducing fee-based discretionary wealth management for clients, using stocks, ETFs

and alternative offerings. The firm also added two full-time CPAs to provide complex tax planning, as well as an estate practitioner who specializes in risk mitigation.

However, the advisor-client relationship has always been central at PWM. “Through all this transformation, the focus on empowering the client through continuous education has remained in the forefront,” Haakensen says.

Another consideration is the huge leap in technology that has been made over the past decade. It’s a considerable expense, but the teams that have thrived are those that can use new tools most effectively.

“Technology has made our business much more refined and comprehensive,” Haakensen says. “Easier and more extensive access to market data has increased our efficiency and speed of decision-making. Online access to client meetings has made it much more efficient to service clients from a distance, and better online access to client statements and tax reporting has kept the client more informed with less hassle.”

While technology has provided advisors more tools to do their job, there are downsides to the modern era, too. When PWM launched, clients were often more patient and more likely to follow guidance than their modern counterparts, which has presented a challenge to Haakensen and his peers.

WPC: How have increased compliance requirements changed your business?

Kevin Haakensen: Increased compliance has created the need for not only additional administrative staff time, but also for advisor face-to-face time with clients. The unintended consequence of certain compliance changes, in our opinion, is that at times it can be a disadvantage to the client, as they spend more time doing less productive activities with their advisors instead of what they really want to talk about, which is how to create and protect their wealth.

WPC: Do you believe independent advisory firms have a future?

KH: We absolutely believe that quality firms, offering a truly comprehensive experience that 100% of the time puts the clients first, will have a future. Our belief is that there are a couple of facets of advisory services. One is clients who want the cheapest price possible and are not truly looking for comprehensive wealth planning, or at least are not willing to pay for it, which we do not feel is viable in the long term. The other facet is the client sector looking to work with honest, experienced and educated professionals who have their best interests at heart and go the extra mile to ensure their success. We believe that the independent business model offering the latter has a future for years to come.

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20/10/2017 3:21:14 AM

SPECIAL PROMOTIONAL FEATURE

DIVERSIFICATION

Partnering with advisors to innovate for clients Mackenzie Investments is marking its 50th anniversary by researching the advisor-client relationship CANADIAN INVESTORS want socially responsible investments and global investing expertise, while most financial advisors recognize that clients need innovative new products, according to the 50 Insights survey commissioned by Mackenzie Investments.

To mark its 50th anniversary this year, Mackenzie surveyed Canadian advisors and investors about products, portfolios and advisory relationships (50-insights. com). Their insights and expectations align with Mackenzie’s new sustainable, responsible and impact investment solutions and its China equity fund, in partnership with China AMC.

• 53% of advisors expected clients to increase their international investments over the next two to three years.

• 71% of Canadian investors believe that it’s important for financial advisors to offer socially responsible investments to build strong client relationships.

• Women are more likely than men (35% vs. 27%) to refer their advisors to others.

• 87% of advisors said it’s important to offer clients new/innovative products or solutions.

When it comes to portfolio diversification, investors of all ages were interested in global investing. About three-quarters of investors

“Mackenzie has been helping Canadian investors since 1967 and the company has always looked for insights that enable us to deliver innovative ideas that support advisors and their clients” Barry McInerney, Mackenzie Investments Mackenzie commissioned Environics Research to explore the advisor-client relationship in Canada, and the survey highlights include: • 72% of Canadian investors said it’s important for asset management companies to have unique expertise in global investing.

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(72%) said it’s important for asset management companies to have unique expertise in global investing. A majority also wanted to work with Canadian asset managers: 78% said it’s important for advisors to offer products and services from Canadian-owned asset management companies.

“Mackenzie has been helping Canadian

investors since 1967, and the company has always looked for insights that enable us to deliver innovative ideas that support advisors and their clients,” said Barry McInerney, president and chief executive officer.

Mackenzie prides itself on being a holistic asset management firm that offers a range of investment choices for advisors, including mutual funds, ETFs and private wealth pools. McInerney says having many strings in its bow is what separates Mackenzie from competitors. “We sell investment expertise,” he says. “Having a well thought-out and broad array of investment solutions is in the best interests of advisors and the clients they serve.”

As investor interest in socially responsible investing increases, Mackenzie recently launched two sustainable, responsible and impact investment [SRI] funds. The Mackenzie Global Leadership Impact Fund and the Mackenzie Global Sustainability and Impact Balanced Fund are both designed to generate competitive returns while supporting positive environmental, social and governance [ESG] changes. These funds allow investors to align their values with their investments.

The Mackenzie Global Leadership Impact Fund, subadvised by Pax Ellevate Management LLC, invests primarily in companies that promote gender diversity and women in executive leadership. The opportunity is to allow investors to promote gender diversity while benefiting from the potential

for greater returns on equity by companies with more women in leadership roles.

“We know that, based on research, companies with better representation of women in senior leadership positions can perform better. As an investment thesis, it goes hand-in-hand with the social impact component,” McInerney says.

The Mackenzie Global Sustainability and Impact Balanced Fund, also launched in October, invests in fixed-income and equity securities of companies that are trying to improve certain ESG factors. By integrating ESG criteria into its investment analysis, the fund aims to generate competitive riskadjusted returns while supporting societal or environmental change. This fund is managed through an exclusive partnership between the Mackenzie Fixed Income Team and subadvisor Rockefeller & Co. For investors wanting expanded diversification and high growth potential, the new Mackenzie All China Equity Fund invests primarily in companies in China, Hong Kong and Taiwan, plus companies that derive most of their revenues from the greater China region. China has generated

strong economic growth – average GDP growth was 9.6% per year from 1980 to 2016 – but strong partnerships are essential to succeed in that marketplace. The Mackenzie All China Equity Fund is subadvised by China AMC, which has the experience and local infrastructure to navigate China’s market. Mackenzie holds a minority ownership stake in China AMC, and this fund is part of Mackenzie’s strategy to offer the best choices possible for advisors to access one of the world’s biggest economic engines.

“With GDP growth so strong, China is an opportunity that’s too big to ignore, but too complicated to go alone, so that forces you to look for local partnership opportunities, and China AMC is a terrific partner,” McInerney says.

After 50 years, Mackenzie remains independent and Canadian within a fiercely competitive and global industry. McInerney attributes that longevity to factors such as Mackenzie’s relationship with thousands of advisors across Canada. The firm is a noted advocate of financial advice; its support extends from promoting the value of advice for individuals to advocating for advisors

with securities regulators on policy initiatives that affect the wealth management industry.

“Mackenzie’s experience over 50 years inspires us, and we are steadfast in supporting advisors because we believe investors are much more likely to succeed if they work with a professional advisor,” McInerney says. “Advisors give Canadian investors an advantage in building their wealth, preparing for life events and gaining confidence.

“Working so closely with advisors has given us the insights to develop a diverse range of innovative investment solutions,” McInerney adds. He notes that, in the last 18 months, Mackenzie launched its active ETFs; introduced Canadians to TOBAM, an innovator that specializes in increasing diversification by reducing portfolio biases; developed new income solutions, and recently launched the two SRI solutions and the China equity fund with China AMC. “We’ve worked hard to learn from advisors and their clients and then innovate, innovate, innovate,” he says. “We’re grateful for being a partner to advisors to help Canadians achieve financial success.”

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PEOPLE

ADVISOR PROFILE

Changing course Tina Tehranchian looks back on her journey from her native Iran to leading her own advisory team at Assante Capital Management in Ontario

TINA TEHRANCHIAN’S route into wealth management wasn’t exactly typical. A native of Iran, Tehranchian moved to the US at age 15, shortly after receiving her high school diploma.

That was during the late-’70s and it wasn’t long before relations between the two countries became strained. Regardless, she ended up staying in the US to complete a bachelor’s degree in political science and government at Washington University in St. Louis.

From there, she earned a master’s in communications from the University of Portland, fully intending to embark on a career in the media. After returning to Iran and starting a family, Tehranchian immigrated to Canada to start her media career – but the timing was less than ideal.

“Immigrating to Canada in 1990 – it was the beginning of one of the worst recessions in recent history,” she says. “The media industry, including CBC, was laying off thousands of people. With no Canadian experience, there was no way that I could find a job in media, so I started looking at alternatives.”

While journalism jobs were thin on the ground at that time, there were other industries looking for fresh blood. After seeing in a newspaper advertisement that Sun Life was hiring insurance brokers, Tehranchian took her career in a different direction.

“I really wanted to start my own business, but I didn’t have enough capital,” she says. “I had no idea what life insurance was, but the ad talked about an entrepreneurial opportunity where you could set your own income limits. I thought it would

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be a temporary measure until the recession ended and I could look for work in my own field, but one thing led to another, and I liked the profession.”

Now a senior financial planner and branch manager at Assante Capital Management, Tehranchian has no regrets about that choice. While she began her career selling life insurance for Sun Life and later Met Life, she quickly moved into broader financial planning. After obtaining her mutual fund and securities licences, she earned CLU, CFC and CFP designations.

That meant devoting a huge amount of her spare time to studying, but the knowledge she gained eventually led to her running her own team under the Assante umbrella.

“We have a wealth planning team that is one of the most robust in the industry,” Tehranchian says. “I personally work with a tax accountant, a tax specialist, a CPA and an estate planning lawyer on my team. We look at all aspects of financial planning – estate, retirement, tax, business planning. We act as the quarterback and make sure everything is coordinated.”

Tax planning is the subject of some heated

discourse among financial advisors right now. The federal government’s proposed changes on income sprinkling and passive investment accounts have provoked fierce opposition among advisors. Tehranchian counts herself among those opposed, but she isn’t too optimistic that Ottawa is listening to the growing discontent.

“Unfortunately, my personal feeling is the Department of Finance has already made up its mind,” she says. “They say they are doing consultations, but I doubt the end result is going to be very different. There are some areas where they have not come up with draft legislation, only ideas, so maybe that is more fluid. Where there is actual draft legislation, I doubt we will see big changes.”

While upcoming tax reform is a concern for Tehranchian, working under Assante has been relatively stress-free. Autonomy was one of the factors that attracted her to the industry in the first place, and that freedom is something she values highly.

“The great thing about Assante is that there are no quotas or requirements to purchase products from CI,” she says. “They have to earn our business the same as every

ENCOURAGING PHILANTHROPY AMONG CLIENTS Tehranchian’s client base is largely made up of business owners, entrepreneurs and professionals. Tax planning is therefore a major part of her job, and it’s a place where she can rely on her own personal beliefs to benefit both her clients and society in general.

“I have really focused on philanthropic tax planning, and I have quite a few clients who are philanthropic retirees,” she says. “I work with some major charities – Princess Margaret, St. Mike’s, Sunnybrook, March of Dimes – and they invite me to talk to their donors on how to convert taxes to charitable donations.”

TEHRANCHIAN’S WORTHY CAUSES Aside from running her own advisory team, Tehranchian devotes a great deal of her time to various charities, including:

The Donor Motivation Program: Launched in 1995, this fundraising initiative connects charities with prospective donors

Art.Maison Projects: This nonprofit is devoted to the promotion of Iranian art by artists living in Iran, as well as the considerable diaspora worldwide

“We disclose everything ... Half-baked transparency can be very misleading, which is why I make sure my clients are educated about what fees represent” other mutual fund company. I have clients where I do the asset allocation myself, but the bulk have private-managed accounts.

That means they get to use institutional managers that are not normally available on the retail level.”

Another defining feature of Tehranchian’s business is the fact that compensation is strictly fee-based. She made that decision before CRM2 came into effect, and the new

reporting standard has only proved beneficial to her practice.

“My assets have grown substantially since CRM2 came into being,” she says. “We disclose everything – not just the dealer service fee, but the entire MER. Half-baked transparency can be very misleading, which is why I make sure my clients are educated about what fees represent so they can make apples-to-apples comparisons.”

The McMichael Canadian Art Foundation: This is the fundraising organization for the McMichael Canadian Art Collection, the nation’s only public art gallery that focuses on contemporary and historical Canadian and indigenous art

MacKenzie Health Foundation: Previously the York Central Hospital Foundation, this group raises funds for key projects and initiatives for Mackenzie Richmond Hill Hospital

Fork York Foundation: This charity assists the City of Toronto, which owns and operates the historic Fort York site, in raising funds for capital projects, including the new Fort York Visitor Centre

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SPECIAL PROMOTIONAL FEATURE

FIXED INCOME

Protecting on the downside Franklin Bissett’s Tom O’Gorman explains how best to use a fixed-income strategy, no matter the interest-rate environment

WITH CANADIAN stocks flying high, equity exposure is likely to dominate advisors’ thoughts, but that shouldn’t be to the detriment of fixed income. Even as the TSX soars, advisors should always consider the downside – after all, they are required to offer clients financial guidance in both good times and bad.

For Franklin Bissett’s Tom O’Gorman, bonds are – and always will be – a crucial part of any portfolio. “All investors, at some point in their lives, will need fixed income,” he says. “Even in a low-rate environment, it

rated fund has grown to $2.2 billion in assets.

The fund is primarily composed of Canadian federal, provincial and corporate bonds, debentures, and short-term notes, but the US is increasingly becoming a focus.

“The big thing with the Canadian fixedincome market is its small size,” O’Gorman says. “It is also narrow in terms of the sectors you can buy. Our benchmark FTSE TMX Canadian Universe Bond Index is 70% to 80% government, so the rest is corporate bonds, and half of that is financials. There isn’t a lot of broad sector exposure where you

“All investors, at some point in their lives, will need fixed income. Even in a low-rate environment, it is the only diversification you can have from equity risk” Tom O’Gorman, Franklin Bissett is the only diversification you can have from equity risk. When you have a correction in equities or even a bear market, it is the fixed income that provides the offset because of its negative correlation.”

In addition to his position as director of fixed income at Franklin Bissett, O’Gorman manages a series of funds, including the flagship Franklin Bissett Core Plus Bond Fund.

Launched in 1986, this four-star Morningstar-

40

can diversify and find opportunities where prices aren’t all moving together.”

South of the 49th parallel, the bond markets offer much greater choice for investors. When O’Gorman took over the fund in 2010, he soon added the ‘Plus’ element. This meant transitioning away from traditional Canadian investment-grade bonds to focus on diversification outside of Canada, using currency and derivatives

to hedge risks and drive performance. In its Morningstar Canadian Fixed Income peer group, the fund’s F Series has been a standout performer, posting top quartile returns over the latest year-to-date, one-, three-, five-, 10and 15-year periods, as of September 30.

“In the fund’s US exposure, there is a government and corporate bond component, but there is also a really big mortgage-backed security component,” O’Gorman says. “To put this into context, the US high-yield market is actually larger than the entire Canadian bond market. When we think about adding diversification in a Canadian portfolio, we look at low correlated positions in the US bond market first, where the investment universe is about $20 trillion if you combine everything.”

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PORTFOLIO COMPOSITION: FRANKLIN BISSETT CORE PLUS BOND FUND

Corporate bonds Provincial bonds Federal bonds Municipal bonds Cash and equivalents

Then there’s the interest-rate factor: At the turn of the millennium, the overnight interest rate in Canada was 5.5%. Today, it stands at 1%, following two increases in recent months, but that won’t send many investors rushing out to buy bonds. It’s expected the Bank of Canada will increase rates further in the coming months, but O’Gorman doesn’t expect yields to return to pre-financial-crisis levels anytime soon.

“We are not big on the view that interest rates are moving significantly higher,” he says. “It’s the ‘Plus’ component that offers us the chance to protect on the downside. Not all interest-rate risk is created equal, so these additional components allow us to create a portfolio with better long-term, risk-adjusted

returns for the investor.”

That’s why corporate bonds make up the bulk of the Franklin Bissett Core Plus Bond Fund. For the remainder, O’Gorman and his team favour provincial rather than federal bond offerings.

“The spreads on provincials are pretty attractive and can offer great opportunities, like when we had the energy crash in 2015,” he says. “Provincial bonds – Alberta, New Brunswick, Newfoundland and Saskatchewan – were very cheap, and we added them to the portfolio.”

Yields might be pretty underwhelming, but the main purpose of fixed income is to protect capital and hedge against risk in the markets. The Franklin Bissett team takes

56.57% 23.59% 14.09% 5.95% -0.19%

such responsibility seriously and has built the expertise to reflect that.

“We have derivatives that protect against interest-rate risk and derivatives that act as insurance on corporate bonds, both highyield and investment-grade,” O’Gorman says.

“When volatility is low, buying this form of ‘insurance’ is cheap. You sleep better at night, knowing you have this protection. We work with an entire team of quantitative analysts, mostly PhDs, to structure this insurance.”

In the aftermath of the financial crisis, ‘derivatives’ became somewhat of a dirty word in investment circles, but it was the misuse of derivatives, not the instrument itself, that caused the crash. The use of derivatives is a vital part of the Core Plus Bond Fund because of its ability to deliver downside protection for investors’ portfolios. Derivatives can also provide the fund’s managers with the ability to be nimble when liquidity is challenged.

“Derivatives, which some people think of as ‘weapons of mass destruction,’ can be effective risk-management tools,” O’Gorman says. “So with an interest-rate swap, we can very quickly target the exposure we want on the five- or 10-year yield curve. We can take floatingrate risk, and we can do that very quickly, using our quantitative analysts to help us to find out how best to express these views.”

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20/10/2017 2:28:27 AM

SPECIAL PROMOTIONAL FEATURE

FIXED INCOME

Taking fixed income beyond boundaries When it comes to fixed income, investors should consider a global approach that taps a wide range of asset classes

WITH DEVELOPED market investmentgrade bond yields near historic lows and interest rates rising, investors can no longer readily count on traditional sources to meet their income needs. In today’s environment, investors need fresh thinking and the willingness to add exposure to a wider range of regions and asset classes.

“For many investors, adding global bonds may be critical to meeting their long-term income needs,” says Eric Frape, senior vice-president of product and investments at iA Clarington Investments. “That’s why we’ve expanded our income fund offerings to include the IA Clarington Global Bond Fund and IA Clarington Emerging Markets Bond Fund.” iA Clarington’s new funds are subadvised

by PineBridge Investments, a global asset manager with assets under management of more than US$85 billion.

“PineBridge has deep bench strength in global fixed income, and they share iA Clarington’s commitment to active, high-conviction investing,” Frape says. “We believe that success in global fixed-income investing requires a global footprint and deep local knowledge, and that’s exactly what PineBridge has, with more than 200 investment professionals in 17 countries.”1

Going beyond One of the most attractive opportunities in global fixed income is emerging market debt,

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which has a $US16 trillion market capitalization and spans more than 70 countries.

“Expanding your fixed-income opportunity set to include emerging market debt offers potential for higher yields in a world where interest rates are effectively 0%,” says Michael Kelly, global head of multi-asset for PineBridge Investments and co-lead portfolio manager for the IA Clarington Global Bond Fund.

It’s no surprise, then, that demand for emerging market debt has spiked among

institutional investors. “We’ve even seen some institutional investors move from European investment-grade bonds to emerging market corporate debt,” says Anders Faergemann, senior sovereign portfolio manager for emerging markets fixed income at PineBridge Investments and co-lead portfolio manager for the IA Clarington Emerging Markets Bond Fund.

A key reason many emerging markets have become so attractive is the trajectory of their monetary policies, says Steven Oh,

EMERGING MARKET DEBT OUTPERFORMS AMID FED RATE HIKES Formal Fed rising rate periods Sectors

2/1/19942/28/1995

6/1/19995/31/2000

6/1/20046/30/2006

12/1/20163/31/2017

High-yield bonds

1.43%

-3.21%

8.20%

4.59%

Emerging market bonds

N/A

14.67%

11.83%

5.25%

Bank loans

9.54%

3.93%

5.88%

2.36%

Investment grade credit

0.24%

1.50%

2.61%

1.36%

Core fixed income

0.01%

2.11%

3.09%

0.96%

US Treasuries

-0.79%

3.35%

2.69%

0.57%

Sources: Source: PineBridge Investments, as at August 31, 2017

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It’s an opportunity to hold a very defensive asset class while receiving yields that are far superior to anything with similar-rated credits.”

Senior loans and investment-grade CLOs are two of the 16 fixed-income asset classes that make up the IA Clarington Global Bond Fund’s broad and deep investable universe, which also includes emerging market debt.

Kelly adds that senior loans are particularly attractive as companies begin to invest more aggressively in their businesses.

“This reduces their free cash flow, which lowers the safety margin for credit investors,” he says. “That makes the senior secured nature of senior loans a very attractive feature.”

COLLATERALIZED LOAN OBLIGATION SPREADS VERSUS CORPORATE BONDS 1000

US CLOs

US IG/HY credit

Basis points

800

600

400

200

0 AAA

AA

A

BBB

BB

B

Sources: JP Morgan, Bloomberg, Barclays; as at May 17, 2017

“Expanding your fixed-income opportunity set to include emerging market debt offers potential for higher yields in a world where interest rates are effectively 0%” Michael Kelly, PineBridge Investments global head of credit and fixed income for PineBridge Investments and co-lead portfolio manager for the IA Clarington Global Bond Fund. “While developed markets pursue higher inflation and interest rates, a number of emerging market countries are implementing policies aimed at lower rates and declining inflation – a tailwind for fixed-income investors.”

With the US Federal Reserve on track to continue with incremental interest-rate hikes, investors have another reason to consider emerging market debt. “Our research has shown that when the Fed raises interest rates gradually, emerging market debt tends to outperform other fixed-income asset classes,” Faergemann says.

The IA Clarington Emerging Markets Bond Fund invests for optimal allocation

among the three main asset classes within emerging market debt: local currency sovereign bonds, hard currency sovereign bonds and corporate bonds.

More asset classes Meeting the challenge of today’s income environment calls not only for a global approach, but also a willingness to explore a wider range of fixed-income asset classes.

“Senior tranches2 of collateralized loan obligations [CLOs]2 and senior loans2 are two asset classes that offer attractive yields while hedging against duration risk, which is the sensitivity of conventional fixed income to price fluctuations as interest rates change,” Oh says. “One of the value propositions of CLOs is that no tranche at the AAA and AA level has ever experienced a loss.

PineBridge Investments AUM and data as at June 30, 2017.

2 Definitions: Basis point: One hundredth of one percent.

Tranche: A portion or ‘slice’ of a debt offering. Higher (senior) tranches generally offer less risk and lower returns, while lower tranches offer potential for greater income but with elevated levels of risk.

Collateralized loan obligations [CLOs]: A collection or ‘bundle’ of corporate loans that are offered as an income-generating security. Payments on these loans are the source of the income investors receive.

Senior loans: In a senior loan arrangement, the lender has first claim on the borrower’s assets in the event of bankruptcy. These loans have floating rates that are reset at regular intervals.

1

The information provided herein does not constitute financial, tax or legal advice. Always consult with a qualified advisor prior to making any investment decision. Statements by PineBridge Investments LLC represent their professional opinion, do not necessarily reflect the views of iA Clarington, and should not be relied upon for any other purpose. Information presented should not be considered a recommendation to buy or sell a particular security. Unless otherwise stated, the source for information provided is the portfolio manager.

Statements that pertain to the future represent the portfolio manager’s current view regarding future events. Actual future events may differ. iA Clarington does not undertake any obligation to update the information provided herein. The information presented herein may not encompass all risks associated with mutual funds. Please read the prospectus for a more detailed discussion on specific risks of investing in mutual funds.

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing.

Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.

For more information on the IA Clarington Emerging Markets Bond Fund, the IA Clarington Global Bond Fund and PineBridge Investments, contact your iA Clarington sales representative, or visit iaclarington.com/gobeyond.

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2/11/2017 4:37:33 AM

FEATURES

CRITICAL ILLNESS INSURANCE

Critical thinking on critical illness Saundra Roll of Great-West Life explains why more Canadians need to be prepared for the worst

ON AN international basis, Canada rates highly when it comes to health standards.

This was confirmed by the Global Burden of Disease Study recently published in The Lancet, which showed an average Canadian life expectancy of 83.9 years for women and 79.8 years for men. This compares favourably to the worldwide average of 75.3 years for women and 69.8 years for men.

Old age is not without its challenges, however, which is something Canadians and their financial advisors need to consider. The study also revealed that the leading causes of premature death in Canada are ischemic (coronary) heart disease, lung cancer and stroke. As more and more people make it into their 80s and 90s, the prevalence of these diseases will rise. New data from the Canadian Cancer Society predicts that almost one in two Canadians will be diagnosed with cancer in their lifetime, and one in four will die from the illness.

It’s a frightening statistic, but there are ways to protect both yourself and your family from any financial hardship a prolonged hospital stay might bring. Critical illness insurance is a segment of the business that is growing in importance. While life and health coverage will always be the foundation for Canadian providers, CI plans are emerging as a growth driver. In response, Great-West Life has launched a website, Critical Uncovered, as an educational tool for advisors and the general public.

According to Saundra Roll, assistant

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vice-president of business development and solutions for individual insurance at GreatWest Life, the vast majority of Canadians have no plan in place to protect them if they’re faced with a critical illness. As a result, most would experience severe financial hardship as the result of a condition like cancer, heart disease or a stroke.

“If you do suffer one of those illnesses and you survive, you are generally not

those expecting the government to foot the bill might be in for a nasty surprise.

“I think people assume that the medication they need will be covered by provincial health plans, but often it isn’t,” she says. “If it isn’t covered by an employer drug plan, then you can be out of pocket significantly. But critical illness insurance can help cover that.”

Because critical illness insurance is paid out in a lump sum, a policyholder can use the

“I think people assume that the medication they need will be covered by provincial health plans, but often it isn’t. If it isn’t covered by an employer drug plan, then you can be out of pocket significantly. But critical illness insurance can help cover that” Saundra Roll, Great-West Life back at work right away,” Roll says. “There are certainly additional costs associated with that over and above your normal living costs.”

Even small expenses like transportation to and parking for doctor’s appointments can add up, Roll points out, but an even greater cost comes from the medication required for the recovery process. Drugs for serious illnesses often don’t come cheap, and

funds as he or she sees fit. Often the amount is simply used to replace lost income, as well as to cover healthcare costs. There are other ways the money can be spent, however, which may be equally important after a serious illness.

“Another great use for CI is after you have survived that scare and want family and close friends to come and visit,” Roll says. “Maybe they live in another province or

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another country, and coming to visit means paying for flights and hotels. A CI payment can help offset those costs.”

In general, there are close to 25 different conditions that meet the criteria of a critical illness. What qualifies for a full payout differs according to the policy, however, which is something advisors need to keep a close eye on when setting up a plan for a client.

“The big three are heart attack, cancer and stroke, but not everything under those definitions is considered a critical illness,” Roll says. “There are some cancers today where the treatment doesn’t affect your ability to go to work. In those cases, there would be a supplementary benefit that would pay out a percentage of the full amount.”

Much like a life insurance plan, the premiums for CI vary depending on the person. Age, sex, health and a variety of

other factors will determine just how much a client will pay each month.

“Someone under the age of 45 purchasing $100,000 of critical illness insurance could find a Term-10 policy in the range of $25 to $75 a month, depending on their age, their health and the various other riders,” Roll says.

How much coverage a person buys will usually depend on their economic circumstances, but in Roll’s experience, a certain standard usually applies. “Often insurers will base their policy on two to three years’ salary so it can supplement a person’s income if they are disabled,” she says. “Some will base it on what they think their additional costs may be.”

When applying for a policy, clients will usually be required to provide blood and urine samples, and depending on the face amount, there may also be a paramedical

or doctor’s report required. Where critical illness and life insurance differ is when it comes to a person’s background.

“The key difference in the underwriting in critical illness and life insurance is the focus on family history,” Roll says. “Many of these diseases are hereditary, so we do ask more questions about family history in a CI application.”

Canada’s insurance providers are constantly looking for new growth drivers.

For an industry giant like Great-West Life, critical illness insurance is one such product, which is why the company has committed to increasing awareness across the advisory business.

“We do see this an opportunity for growth,” Roll says. “Life insurance is a bigger seller and probably always will be, but we are trying to increase the awareness of the need for critical illness in the industry.”

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PEOPLE

CAREER PATH

STARTING FROM SCRATCH If there’s one thing life has taught Monica Weissmann, it’s that the only constant is change Raised in communist Romania, Weissmann was encouraged by her parents to study electronic engineering, which she pursued to the master’s degree level. She went on to work in the field, specializing in the research and development of electronic equipment

1960s

STUDIES ELECTRONICS

1968

1974

LANDS IN ISRAEL Weissmann and her husband attempted to leave Romania for years before eventually being allowed to because a party member coveted their apartment. She arrived in Israel speaking not a word of Hebrew “I went to language school for two months, and after that I had an interview with IBM Israel in Hebrew. They couldn’t care less about my degree in electronic engineering; they hired me on the spot because I interviewed in Hebrew. They wanted a fast learner”

WITNESSES HISTORY IN THE MAKING Weissmann was in Prague as a tourist on August 21, 1968, when Soviet tanks rolled into the city “I saw tanks, demonstrations, killings in the streets. I had the opportunity to get out, and I called the Romanian embassy to ask permission to leave.

The moment I picked up the phone, I realized what I did. It was a turning point in my life – I realized I was brainwashed”

1988

STARTS A NEW LIFE (AGAIN) While working for IBM, Weissmann had the chance to immigrate again, this time to Canada “I wanted to live in Canada because it’s a very successful combination of a European cultural background and some American capitalism. It was still a shock. Canada is much more capitalist than Israel; you have to be more independent – and Israel was a big change from Romania, to be able to buy anything at will. In Romania, if you needed soap, you’d have to line up and be lucky”

2000 MAKES A CAREER CHANGE The new century brought a new path for Weissmann. In more than 25 years with IBM, she had moved from software to hardware, and from marketing to sales and back. But frustration launched her into a new career

“I couldn’t find a good advisor; I had three advisors between 1990 and 2000, and I wasn’t happy with any of them. My goal is to be the advisor I wished I’d had” 2012 PAYS IT FORWARD An inveterate volunteer, Weissmann has a special place in her heart for the work she does with the Wellspring Cancer Support Network. A cancer survivor herself – she was diagnosed in 1990 and was close to death at one point – Weissmann is grateful for the help and support she received from the Canadian Cancer Society, and she continues to pay it forward by providing counselling to cancer patients 46

2010

GOES OUT ON HER OWN Feeling constrained by her employer, Weissmann made the decision to go independent “Edward Jones was a phenomenal company for a beginner without industry experience; it was a fantastic stepping stone, but I should have stayed three years, not 10. I grew and developed much too much. I wanted to have my own business and be an independent advisor; there were other companies that allow that. I literally walked across the road and into a new job”

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PEOPLE

OTHER LIFE

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

More than 5,000 East Berliners made attempts to escape over, under or through the wall

26

Number of times Jaehn-Kreibaum has given his Berlin Wall presentation

185

Size of Jaehn-Kreibaum’s largest audience

28

Years the Berlin Wall stood

EYEWITNESS TO HISTORY Christian Jaehn-Kreibaum spends his spare time working to keep history alive WHEN HE overheard a twentysomething say she had no idea there had ever been a wall in Berlin, Ontario-based financial advisor Christian Jaehn-Kreibaum began to formulate an idea. Born in Berlin the year before the wall went up, Jaehn-Kreibaum’s upbringing was punctuated by experiences such as having his family car searched for fleeing East Berliners on the yearly journey to see relatives. “It was part of daily life

seeing people trying to escape,” he says. “I grew up in a country divided.”

Anxious to keep this history from fading from the public consciousness, the Raymond James advisor spent almost 50 hours working on a presentation about the Berlin Wall, which he debuted in December 2014 at his local Kiwanis Club in Trenton, Ontario. That presentation led to other invitations to speak.

While his presentation is peppered with intriguing facts – including tales of successful escapes via hot-air balloon and a stolen streetcar – Jaehn-Kreibaum’s firsthand experience brings it to life. On the day the wall came down, he remembers seeing a massive cloud of car fumes approaching the wall. The smog-filled air, Jaehn-Kreibaum remembers, “smelled awful. But for [East Berliners], it was the smell of freedom.”

Christian Jaehn-Kreibaum is a financial advisor with Raymond James Ltd. The views of the author do not necessarily reflect those of Raymond James. This article is for information only. Raymond James Ltd., member of Canadian Investor Protection Fund.

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