Wealth Professional 3.01

RRSP SPECIAL: THE LOWDOWN ON THE ECONOMY IN 2015 HEADING FOR GROWTH CANADA’S OLDEST WEALTH MANAGEMENT FIRM BULKS UP VICTOR DODIG CIBC PUTS WEALTH MANAGER IN THE BIG CHAIR

WWW.WEALTHPROFESSIONAL.CA ISSUE 3.1 | $6.95

UK AND AUSSIE ADVISORS WHAT HAPPENED WHEN EMBEDDED COMP WAS BANNED

CANADA’S LEADING FINANCIAL ADVISORS REVEALED

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CONTENTS

4 | Upfront

14 | Industry icon

How one firm is staying ahead of the CRM2 curve

CIBC’s brand new CEO, Victor Dodig, puts the accent on wealth management

6 | Industry intelligence

46 | RRSP special

The key mergers, acquisitions and appointments that closed out 2014

8 | Statistics Canadian Boomers are finding new sources to fund retirement

10 | News analysis Australia implemented regulations similar to CRM2.

What have the effects been?

14

Everything the buttoned-down advisor needs to know for the year ahead

58 | 3Macs attacks Canada’s oldest financial advisory firm bulks up as it gets ready to conquer the west after 160 years in business

62 | Guest column Montreal advisor duo the Bakish Brothers outline a strategy for dealing with the imple­mentation of the new CRM2 regulations

64 | Ten questions With the Wolf on Bay Street, Wolfgang Klein

20

THE TOP

COVER STORY

Top 50 Advisors

issue

3.1

Canada’s best financial advisors are revealed in our annual roundup

JANUARY 2015 | 1

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EDITORIAL

A LIST THAT’S LONG OVERDUE COPY & FEATURES EDITOR Vernon Clement Jones SENIOR WRITER Jeff Sanford WRITERS Samo Ayoub, Will Ashworth COPY EDITOR Clare Alexander CONTRIBUTORS Sean Van Zyl, Joseph Bakish, Nick Bakish

ART & PRODUCTION ART DIRECTOR Daniel Williams GRAPHIC DESIGNER David Calderon

SALES & MARKETING NATIONAL ACCOUNTS MANAGER Dane Taylor ASSOCIATE PUBLISHER Trevor Biggs GENERAL MANAGER SALES John MacKenzie MARKETING AND COMMUNICATIONS Claudine Ting PROJECT COORDINATOR Jessica Duce

CORPORATE PRESIDENT & CEO Tim Duce OFFICE/TRAFFIC MANAGER Marni Parker TRAFFIC Kay Valdez EVENTS AND CONFERENCE MANAGER Chris Davis

Editorial enquiries vernon.jones@kmimedia.ca Advertising enquiries dane.taylor@kmimedia.ca Subscriptions tel: 416 644 8740 • fax: 416 203 8940 subscriptions@kmimedia.ca

It’s back. A year after the initial release of the WP Top 50 Advisor ranking, we’ve reprised the list. Hundreds of you filled out our short online questionnaire (thank you to those who did), and we sliced and diced this info to come up with this year’s list. Find it on page 20.

It is about time such a list exists. There have been rankings of firms and dealers, but to this point, there has not yet been a list dedicated to individual financial advisors.

Our Top 50 Advisors list rectifies this oversight – and just in time. After decades of below-the-radar development, the modern wealth management industry has emerged to become an important, major sector in the Canadian financial services industry. Our story about the rise of Victor Dodig to the position of CEO at one of Canada’s big banks (page 14) is proof of that.

As a way of celebrating the new status of the wealth management industry, we’ve taken it upon ourselves to create the Top 50 list. We hope you’re as excited about it as we are. This is your list. Consider this recognition and an accolade for those who are working to create the sophisticated, client-focused practices that define the Canadian wealth management industry, one of the world’s strongest.

Jeff Sanford Senior Writer

KMI Publishing 312 Adelaide Street West, Suite 800 Toronto, Ontario M5V 1R2 Wealth Professional is part of a international family of B2B publications and websites for the finance industry Offices in Toronto, Sydney, Auckland, Manila, Denver wealthprofessional.ca Copyright is reserved throughout. No part of this publication can be reproduced in whole or in part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as WP magazine can accept no responsibility for loss.

CONNECT

Contact the editorial team:

vernon.jones@kmimedia.ca

2 | JANUARY 2015

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UPFRONT

READY FOR THE ‘CRM2 WORLD’? THIS FIRM IS Full implementation of CRM2 is more than a year away, but for firms like GP Wealth – aggressively planning on all fronts – it’s practically yesterday There are two types of advisors today. There “For us, the advantage is 2016, are those who think about the next phase of CRM2 with anxious trepidation. And when the whole industry is then there are those who look forward to the coming shifts with anticipation, and an shifting. I say bring this challenge eye toward building their business.

Some of those in the latter camp are the on”–George Aguiar, CEO, GP Wealth advisors and executives at Toronto-based GP Wealth management. The firm is aggressively working to meet the challenges of CRM2.

Those living in the GTA may have noticed the firm has begun running television commercials. Next up, the firm will host dignitaries like former Mississauga mayor Hazel McCallion when it cuts the ribbon at the opening of a new head office in that city.

That is, things are looking good at the firm as it embraces the coming period of change.

At the helm of GP Wealth is George Aguiar, the well-known, well-respected CEO. Aguiar started in the investment advisory industry back when it was still a cottage industry.

“Everyone had their money in GICs. You had to go out in the market and talk about mutual funds,” he says. He started a company, Money Concepts, and built that up before starting GP Wealth, which boasts a team of 40 experienced advisors. The firm manages more than $1 billion in assets. CRM2 is not the only challenge the company is dealing with right now.

“A lot of advisors don’t have a succession plan,” he says, “but a lot of advisors have grey hair. Many want to sell a practice to retire, but haven’t firmed any plans up.” GP Wealth is dealing with this issue by developing a formalized succession plan that can help seasoned advisors ease out of the industry and into retirement. “It’s a sign of the times,” Aguiar says. “We have an aging advisor force.

There is a lot of talk, but there are not a lot of formal processes in place. You get an advisor with $75 million in assets. That’s a big number, but there are no new entrants that can pick that up. The young blood may not have the financial resources necessary to take that over.

The young guys don’t have the money to buy that advisor out,” says Aguiar. This is where GP Wealth comes in.

The company has developed a program to acquire practices from retiring advisors. The firm matches up the book with a younger advisor, while helping out with bridge financing. “We’re guaranteeing the exiting advisor a pay-out. We find a suitable candidate and finance that transition,” Aguiar says. “It sounds simple, but it’s a complex process.

We’re systematizing this process.”

Then there’s the CRM2 conversion. Aguiar pulls no punches when he talks about the coming challenges for some practice models.

“This will sound blunt, but CRM is not a big dealer, small dealer issue. It’s a big advisor, small advisor issue. Those with less than $30 million in assets under management are going to struggle in this environment. Advisors using deferred sales commissions may find that more difficult to carry on their business. I will advocate for choice. But I think that model is going to be challenged.”

He goes on to suggest that, arguably, the cost of advice is settling out at somewhere around .75 basis points. With assets of less than $30 million under administration, that will leave $150,000 to fund a practice. Getting a practice to work under this model is going to a challenge. “If the market isn’t educated on the cost of service, we could see some practices disappear,” Aguiar says. “Advisors will have to demonstrate value to the client.

The challenge around CRM is, ‘How do you demonstrate your value fully to the client?’

In an era of full transparency, how do you justify the money you charge?”

In the case of GP Wealth, the company has been working up its fee-based model, setting up a flexible, fee-based platform that can offer tiered pricing. Many of the firm’s top advisors have been using it for a couple of years. In the years ahead, tax planning, currently done once a year, will become a year-round duty. There also has to be a documented net-worth statement that is reviewed annually with the client. “This is the benchmark document around which the advisor’s practice revolves,” Aguiar says. “It sounds simplistic, but that has to be done. Advisors will want to connect back to pure advice.”

Today, 80% of the business at GP Wealth is fee-for-service. But even the new models have their challenges. “In terms of the feebased platform, things are in the honeymoon phase,” Aguiar says. “High-end clients are happy to see lower costs and transparency, but we haven’t seen a serious market test yet.

If you’ve got a client with 90 basis points in fees, that’s $9,000. But what if we have a market decline of 10%? If the account goes from one million to $900,000, the client is going to think, ‘I just paid $9,000, but my account went down $100,000.’ That hasn’t happened yet, but I’m not going to pretend that’s not going to be an issue.

“We’ve been thinking about these things,” he continues. “We’ve had three or four years now to get this done. For us, the advantage is 2016, when the whole industry is shifting. I say bring this challenge on. ”

4 | JANUARY 2015

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INDUSTRY INTELLIGENCE

INDUSTRY INTELLIGENCE

Wealth Professional’s regular wrap of all the important industry moves and plays

CORPORATE MOVES

PRODUCT NEWS

The Royal Bank of Canada is spending $5.4 billion on a Los Angeles-based bank. RBC’s acquisition of City National Bank is the largest by a Big Six bank since the financial crisis in 2008.

The deal comes as a surprise to both analysts and investors alike. In 2011, RBC sold its US retail banking operations for $3.6 billion to focus on wealth management and capital markets. This acquisition highlights the dearth of growth opportunities within Canada.

Manulife’s US division, John Hancock, has announced that it is buying New York Life’s retirement plan services business. While no terms were released, the deal adds $50 billion in assets under administration.

Analysts generally liked the deal. “Given MFC’s success in wealth management over the past several years, we consider management’s intensifying focus on wealth management, and aversion toward protection, as a positive for valuation,” said National Bank’s Peter Routledge.

This is the second major acquisition Manulife has made over the past year, the other being its $4 billion purchase of Standard Life’s Canadian business.

BDO Canada LLC has announced that it is merging its Kitchener, Ont., operations with those of Dube & Cuttini Chartered Accountants LLP. The combined operation will focus on real estate advisory, although it will continue to work with clients across a number of different industries.

APPOINTMENTS National Bank has appointed former CMHC CEO Karen Kinsley to its board of directors. A CPA by training, Kinsley served as CEO of CMHC for a decade, stepping down in 2013. Her appointment is another boost for women in the boardroom.

OPTrust, one of Canada’s largest pension funds, has appointed lawyer and pension expert Hugh O’Reilly as its CEO.

TD Bank has announced the appoint­ ment of Mary Jo Haddad to its board of directors. Haddad, formerly CEO of The Hospital for Sick Children, is also director of Telus and the Kids Health Links Foundation.

Scotiabank’s online bank, Tangerine, has announced that it has hired Ian Cunningham as its chief operating officer. Cunningham comes to Tan­ gerine via Capital One and Pepsi.

> BMO ETFs has launched four new ETFs: ZGQ, ZUQ, ZEL and ZDI. The first two invest in companies with stable business models and viable competitive advantages, one globally and the other in the US. ZEL invests in corporate bonds, providing a link to benefit from any upside in the equity markets. The final new ETF, ZDI, provides investors global exposure to large-cap, dividend-paying stocks. > First Asset has expanded its factor-based group of ETFs with two funds utilizing Morningstar’s international value and momentum indexes. Trading under the symbols VXM and ZXM, the ETFs offer hedged and unhedged versions. The additions bring the total number of ETFs offered by First Asset tracking Morningstar indexes to nine. > Purpose Investments has added to its dividend ETFs with the introduction of its Purpose US Divi­dend Fund, which trades under the symbols PUD (hedged) and PUD.B (unhedged). Joining its already successful Purpose Core Dividend Fund, PDF, its newest ETF gives Purpose dividend plays on both sides of the border. > BlackRock, Canada’s largest ETF company, has launched a new fund-of-funds, the iShares Short Term Strategic Fixed Income ETF (XSI). The portfolio consists of six ETFs designed to generate greater income in a low-yield environment. It’s designed to optimize the balance between yield and duration — 3.9% yield and 3.5-year duration — at a time when the fixed income landscape is quickly evolving.

6 | JANUARY 2015

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29/01/2015 9:44:31 AM

STATISTICS

Plan B? Canada’s aging population drives demand for reverse mortgages CANADIANS OLD ON A WORLD SCALE

REVERSE THE TREND > As Canada ages and retirees look for ways to supplement their retirement income, demand for reverse mortgages is expected to grow by at least 25% annually for the foreseeable future.

Canada’s median age is 41.7 years, considerably higher than the US’s 37.6 years and higher than most of the rest of the world

> Canada’s leading reverse mortgage provider, HomEquity Bank, saw originations grow to $309 million in 2014, up 23 % from the prior year. The lender’s total book size is $1.7 billion. > A Manulife survey suggests that 20% of Canadians will use the equity in their homes to partially finance their retirement. Moreover, almost 50% of Canadians expect to be in debt when they do finally leave the workforce.

Years 14-20

30-35

20-25

35-40

25-30

40+ Source: CIA World Factbook

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WEALTHPROFESSIONAL.CA

The numbers say it all: Canadian Boomers are living longer, and few are saving enough March of time: The average life expectancy of Canadians ranks fourth amongst G20 nations

100 80

ADVISOR AGES REFLECT TREND, TOO Canada’s wealth professionals are no exception to the age rule. According to Wealth Professional’s recent lifestyle survey, just 23% of advisors are under the age of 40, and 15% are 60 or over.

60 40

AGE

% ADVISORS

AGE

% ADVISORS

20-29

5.3% 7.6% 9.9% 14.4% 16.4% 15.7% 16.1%

60-64

7.9% 5.2% 1.5% 0.4% 0.0% 0.4% 0.1%

30-34 35-39

20

Source: CIA World Factbook

45-49

USA

SOUTH KOREA

EU

UK

GERMANY

FRANCE

CANADA

ITALY

AUSTRALIA

0

JAPAN

40-44

50-54 55-59

65-69 70-74 75-79 80-84 85-90 91+

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Round

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Job Description:

Mechanical Specifications:

Contact:

Client: TD

Bleed: None

Acct. Mgr: Christian / Genevieve

Colours: 4C

Producer: Barry D

29/01/2015 9:44:43 AM

NEWS /ANALYSIS

Feeling the effects of commission bans Regulations similar to CRM2 in Australia and the UK don’t appear to have produced the disaster many predicted

By Sean van Zyl Despite dire warnings of imminent industry turmoil, the Australian legislation tabled in 2012 that banned payment of commission-based remuneration has had little or no effect on the number of advisors working in the industry, suggests a new report from Australian regulators.

In 2012, the Australian Securities Investment Commission [ASIC] introduced new regulations for financial advisors under the Future of Financial Advice [FOFA] legislation, effectively banning all forms of embedded commissions for wealth managers. It caused a furor among financial advisors, who predicted a dramatic reduction in the number of advisors working

in the industry and raised concerns that lower-income consumers would no longer have access to advisors.

At a recent symposium in Toronto in which UK and Australian experts discussed the likely effects of similar CRM2 legislation, Anthony James of PwC Australia expressed caution about the FOFA reforms.

The worry was that consumers, unable to pay upfront advisory fees, would simply avoid accessing wealth management advice, would turn to more basic technology platforms known as robo-advisors or would access in-house financial products offered by banks.

But were these worries misplaced? According to the ASIC’s report, advisor numbers have not declined

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WEALTHPROFESSIONAL.CA

since the FOFA legislation was introduced in July 2013. The report is based on a sample of 60 Australian financial service “licensees” representing 10,000 advisors and accounting for an estimated 4.6 million retail clients. The conclusion will be reassuring to Canadian advisors: “Most licensees did not change their service offerings as a result of FOFA, although some indicated an increase in scaled advice and strategic advice.”

That said, the report is somewhat vague in terms of the overall impact of moving from commission-based remuneration to a fee-based model. The report concludes that “…while licensees were generally supportive of the objectives of FOFA, some queried whether the changes would be effective in increasing access to affordable financial advice. Some were critical of the form of the changes and the associated compliance costs.”

There do seem to be some changes occurring, however. The number of advisors is holding steady rather than increasing. Mergers and acquisitions have consolidated smaller financial institutions and firms. There has been a bit of a concentration of business at the big banks. Richard Boyce, head of family office services for Ernst & Young Oceania, notes that about 80% of retail funds under management are looked after by six main financial institutions that account for approximately 70% of financial advisors in Australia. Notably, Boyce points out the recent joint announcement by 100F Holdings Ltd. and SFG Australia Ltd., which will see the two largest financial institutions merged into an entity with about $60 billion (AUS) under management.

An earlier study of FOFA impact compiled by Rice Warner Actuaries predicts a short-term boost in financial advisory numbers before settling to a level of employment similar to today’s industry population.

“For example, after 10 years, total advisor employment is estimated to be 17,375 by June 2023 compared with 18,096 at the end of June 2012,” the study states.

Furthermore, the study suggests there will be a divergence between those who offer full (holistic) advice and those providing scaled advice.

The report anticipates that the current number of financial advisors providing a full/holistic service (17,750) will rise slightly over the next five years and then drop back to around 15,000 by 2027. By this stage, Rice Warner expects there will be an additional 2,700 financial advisors offering scaled advice to clients.

With a reduction in the number of advisors, and an aging population where the demand for advice is actually increasing ... we believe we are seeing demand exceed supply, and the price of advice has increased, reducing the participation of middleincome earners

Brad Fox, CEO of the Association of Financial Advisors in Australia

The study does indicate, however, that financial advisory remuneration across both the full-service and scaled-service providers will rise in real terms, but significantly less than had been the case prior to the introduction of FOFA. “On average, the price of financial advice is expected to be lower after these regulatory changes, with the reforms facilitating a shift toward less costly scaled advice and more transparent charging for complex advice.”

JANUARY 2015 | 11

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NEWS /ANALYSIS

Not everyone agrees with these conclusions. Brad Fox, CEO of the Association of Financial Advisers in Australia, says FOFA has brought about some positive changes: more ‘client-centricity,’ a better delineation between strategic advice and product recommendations, as well as an increased focus on “outcomes-based advice solution, or highly tailored advice.”

But there also have been negative effects. According to Fox, based on the experience of the 100 largest licensees, there has been a 13% reduction in the number of financial advisors over the last five years. Other negative effects include increased compliance requirements, “which have not improved the advice.” The ‘average’ advisor was giving appropriate advice prior to FOFA, says Fox – and while there has been an improvement in the quality of advice given by those who may have been below average, those who haven’t been able to change or improve the advice they give have left the industry.

Fox also suggests that the costs of providing advice have increased significantly due to the increased compliance measures. “Couple this with a reduction in the number of advisors, and an aging population where the demand for advice is actually increasing, and we believe we are seeing demand exceed supply, and the price of advice has increased, reducing the participation of middle-income earners,” he says. “Fewer people getting advice is a poor community outcome and will increase future government costs for aged care support for Australians who have not maximized their wealth opportunities.”

That said, Fox did note that those advisors who shifted to ‘unbundled advice’ (and away from embedded compensation) have not experienced a loss of clients. “One thing is very clear – the ‘best advice’ practices are growing quickly because of their ability to concisely demonstrate the value they provide through both their advice and their service,” Fox says. “Financial advice is primarily a service business, and as consumerism continues to shift buying power to the consumer, those businesses that clearly provide valued outcomes are increasing their success.

Products and pricing are being commoditized, therefore advice and service have become the key source of differentiation.

In summary,” he continues, “providing advice has become more expensive, and costs to clients have increased. Generally this has aligned with greater focus on client outcomes and most likely greater value from their advice.” It appears there is still some debate over the lingering effects of FOFA.

?

UK UNCERTAINTY The UK financial services regulator, the Financial Conduct Authority [FCA], also introduced similar regulations around advisor commissions and fee disclosure rules in 2013, packaged as the “Retail Distribution Review” [RDR].

Recently, the FCA released a follow-up report on the impact of the regulations on the industry, arguing that there is no current “substantial gap” in advisory provision within the market. However, the FCA concedes that, due to lack of statistical data, there could well be an argument that in certain customer segments unable to afford upfront fees, there may be reduced availability of advice due to factors such as:

>> Advisors focusing on customers most likely to afford upfront fee-based remuneration >> A move from full-service to holistic-type financial planning models >> New large-scale financial services focused on serving the needs of less affluent customers have yet to be developed to a necessary extent

Looking forward, the FCA expects that more than 60% of demand for retail investment advice is likely to be transactional-driven rather than holistic. “It is therefore quite possible that the initial strategic response of advisory businesses to the RDR to move toward holistic financial advice would lend itself to a capacity application mismatch and a shortage of advice capacity – especially at the lower end of the mass market,” the report surmises.

Garry Heath, former director general of the IFA Association and a strong proponent of advisor commission-based remuneration arrangements, produced a report in August 2014 indicating that the financial advisory population has fallen by 11,000 since the introduction of RDR. Heath told the audience at the Toronto symposium, “We [UK] are in a place you [Canada] don’t want to be.” Heath claims that around 23 million individuals in the UK previously had access to a financial advisor, but this number has plummeted to 13 million consumers in the wake of RDR. However, there is very little statistical evidence to support this premise.

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CANADIAN FIXED INCOME XIC XEI

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INDUSTRY ICON

MEET THE NEW BOSS

The appointment of Victor Dodig to CEO of CIBC marks the first time a Big Five Canadian bank has appointed a wealth manager to the top spot. Has the financial advisory industry in this country grown up?

CHANGE IS GONNA COME Is the Canadian banking sector cycling into a new phase? Some suggest as much.

CIBC is the fourth of Canada’s six largest banks to name a new CEO within the past two years. Royal Bank of Canada’s Gordon Nixon has been succeeded by former consumerbanking head David McKay. TD Bank’s Ed Clark was replaced

by COO Bharat Masrani. Brian Porter became Scotiabank’s CEO in November, replacing Richard Waugh. CIBC also recently announced that former minister John Manley will become chair of the board.

Two rumours floated around Bay Street in the weeks before the announcement. The first was that David Williamson, the head of retail banking at CIBC, would replace outgoing CEO Gerald McCaughey, who was stepping down a few years early. Williamson made sense as a successor. Retail banking has long been the bread and butter of the Big Five Canadian banks. As a division, it brings in 70% of CIBC’s profits. Appointing Williamson as CEO seemed like a logical move.

The other rumour was a bit juicier: CIBC would be the first of the Big Five banks to overturn 100 years of tradition and go outside the firm for a new CEO. The decision that was finally handed down was, in the words of one analyst, “a shock to the street.” The new CEO of Canada’s fifth largest bank would be neither Williamson nor an outsider. It would be Victor Dodig, the head of wealth management for CIBC. Few saw it coming. Never before had one of the big banks promoted the head of wealth management to the top spot. Is this appointment a coming-of-age of sorts for the wealth management industry?

GROWING SECTOR It’s a good time to be in wealth management. Not a week went by in the second half of 2014 without some global banking executive explaining how import the wealth management division would be to their organization.

As it is, various industry forces are exerting changes on the business outlook at global banks. Low interest rates, indebted consumers and placid markets are combining making it more difficult for banks to make money. Traditional channels for generating profits, like capital markets operations or consumer lending, are not as lucrative today. And so, as a way of satisfying investors that growth is not stalling, many banks are mentioning wealth management as one sector that will drive growth in the years to come.

In November, New York bond-rating firm Fitch released a report outlining how and why wealth management will be the answer to the banks’ new revenue conundrum. According to Fitch, technology is making advisor services easier to offer to lower net-wealth clients. Focusing on wealth management will allow banks to diversify earnings and increase revenue per customer. Advisor-based asset management provides “recurring sources of income and requires less capital usage than traditional bank loan products.” Wealth management also strengthens “relationships with good customers, making these relationships ‘stickier.’”

New technology is also allowing wealth management technology platforms and brokerage programs to become easily scalable, which can help grow both assets under management and transaction fees.

“Wealth management has always been a kind of boutique niche area for the banks,” explains Justin Fuller, the New York-based senior director of financial institutions for Fitch and the lead author of the report.

“But this is changing. Earnings of the banks that rely on wealth management will be a little more volatile, as they will be tied to equity markets. But there are other attractions to this business: It does not require large amounts of regulatory capital, and it is easy on the balance sheet, since most very rich people lend more to banks than they borrow from them.”

A BOLD MOVE In light of this, it seems that CIBC, by appointing the head of its wealth management division to CEO, is leading the industry. Could the bank, so long considered the laggard of the big Canadian banks, be the new trendsetter?

Among the Big Five Canadian banks, CIBC the roughest ride through the late 1990s and 2000s. There was the participation in those odd off-balance sheet deals with Enron. CIBC’s exposure to the US subprime

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INDUSTRY ICON / VICTOR DODIG

Dodig told investors he hopes to generate at least 15% of the bank’s overall profit from wealth management, growing it from just 8.7% in 2010 METEORIC RISE In the decades since the 1970s, the growth in the wealth management sector has been profound. Just a couple decades ago, it was tough to find someone who identified as a personal financial advisor, save for the odd individual working for very well-off families. But in the 1970s, accountants began to pick up on a new market opportunity – offering financial services for a wider range of professionals.

Since then, the wealth management sector has grown. Canadians began to move savings from GICs and bank accounts into stocks, bonds, mutual funds and other, more complex savings vehicles. More people among the general population took up investing as a pastime. The creation of the RRSP saw vast swathes of the population began to pay attention to things like price-earnings ratios and management expense ratios. The modern financial advisory industry expanded.

Now, in the second decade of the millennium, wealth management is coming to the fore as a new and serious strategic for one of the country’s big five banks.

“I think wealth management is going to have to drive earnings,” says Stan Wong, a ScotiaBank advisor. He points out that there is more money than ever in the sector. Boston Consulting Group estimated the total investible assets of the world’s wealthy at around $122 trillion last year, almost enough to buy all the shares traded on the New York Stock Exchange 10 times over. (Capgemini and Merrill Lynch come up with a more modest estimate of about $43 trillion.) Either way, the market is certainly big enough to be interesting, and everyone agrees that it is growing quickly.

mortgage mess saw the bank write down $10 billion in badly structured products. The Globe and Mail famously noted that the bank “cemented a reputation as the bank most likely to accidentally maim itself while running with scissors.” Eventually, conservative banker Gerry McCaughey was brought in to ‘de-risk’ the place. After a decade at the helm, it seems he has done that.

Under McCaughey’s careful hand, the bank has avoided serious blow-ups, and even begun to beat quarterly earnings estimates posted by analysts. For the third quarter of 2014, all of Canada’s big six reported impressive ROEs, but the “standout performer,” according to one source, was CIBC with an ROE of 21%. McCaughey had also begun tilting the bank toward wealth management, working with Dodig

on two “foundational” investments for the bank.

The first was a 41% stake in major US asset manager American Century Investments for US$848 million.

Then, in 2012, the company acquired private wealth management business of MFS McLean Bidden, a subsidiary of Sun Life Financial. More recently, in January 2014, CIBC announced it was buying Atlantic Trust Private Wealth Management, a leading US-based private wealth management firm, from Invesco for US$210 million. “Our acquisition of Atlantic Trust aligns with our strategy to grow our wealth management business in North America and supports our goal to grow wealth management to 15% of the bank’s overall earnings,” Dodig was quoted as saying at the time. These investments represent CIBC’s return to the US after several years of retreat.

Dodig’s appointment as CEO marks the first time in modern Canadian banking history the CEO has come from the wealth management side of the bank.

There was a time in the 1990s when CEOs were being picked from investment banking divisions. It was argued then that retail heads were not aggressive enough for the era of global banking. But today, the story is changing again. Baby Boomers are retiring – a thousand Canadian Boomers are turning 65 every day.

Managing the portfolios of this aging demographic is going to be a serious bit of business for the banks in the years ahead.

Many advisors will be familiar with Dodig. A native of Toronto, he received a Bachelor of Commerce at St. Michael’s College at the University of Toronto while working as a teller at CIBC. He went on to earn an MBA at Harvard University, where he was a Baker Scholar, a distinction awarded to the top 5% of the graduating class. He is fluent in French and holds a diploma from the Institute Études Polities in Paris.

Three years as a management consultant with McKinsey and Co. were followed by five years as managing director for Merrill Lynch in Canada, the US and the UK. He was named managing director and Canadian CEO for UBS Global Asset Management before joining CIBC in 2005 as an executive vice-president of retail distribution. In 2011, he was appointed as head of wealth management, where he took on responsibility for the bank’s brokerage, private wealth and asset management businesses in both Canada and the US. “Victor’s got lots of energy; he’s a very solid thinker,” says Michael Wilson, a former finance minister who hired Dodig while at UBS’s Canadian unit. “It was quite clear when I met him and when he first started with us at UBS that we weren’t big enough for him.”

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INDUSTRY ICON / VICTOR DODIG

TAX TRENDS The big banks enjoyed a long decade of lowered tax costs as they moved many operations offshore. Is the long-term trend of reducing bank taxes at an end? As Boomers retire, governments will be starved for money. It would not be surprising to see the tax trend turn.

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39.8%

35.2%

22.9% 21.4% 19.4%

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15.1%

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CIBC

THE ROAD AHEAD In the wake of his appointment as CIBC’s CEO, Dodig wasted no time setting out some of his goals for the bank in the years ahead. In his first public appearance as CEO, Dodig told investors he hopes to generate at least 15% of the bank’s overall profit from wealth management, growing it from just 8.7% in 2010. “It could get to 20%,” he added. He also hopes to have 40% of the bank’s wealth management earnings come from outside Canada within the next four to five years.

At the moment, the figure stands at 18% to 20%.

Dodig went on to suggest that the wealth management division could serve the top 10 or 20 markets for high net worth individuals in the US. The Wall Street Journal noted that Dodig was “whetting investors’

appetite” for a wealth-management acquisition in the US by “dangling the prospect” of doing up to $2 billion in deals south of the border. The goal is nothing less than to build a “national presence.”

The strategy seems a smart one. Among the various wealth management firms in the US, there is some $5 trillion in assets. Many of the firms are relatively small, and could be ripe for consolidation. So far, the new strategic direction is being applauded by analysts.

Peter Routledge, an analyst at National Bank Financial, was quoted in the Saskatoon Phoenix-Star as saying that achieving the diversification goal would be “an unequivocal positive” for CIBC’s stock price. “The greatest long-term risk facing CIBC is its reliance on Canadian personal and commercial banking,” Routledge noted.

In an interview with WP, Routledge expressed confidence in Dodig. “He’s a wealth management expert. He’s made his mark this area. I think because of his background, he’ll continue to grow out that business. He’s been careful on acquisition. We have yet to see CIBC overpay.”

This is where the risks in this strategy lie. Commentators suggest the bank could fund an acquisition of up to $1 billion without the need to issue fresh shares. But Fuller, the Fitch analyst, warns the new interest in wealth management will necessarily see prices increase. “That Dodig comes from the wealth management side should tell you where their strategy is. Wealth management is a good place to be, but we’ll see how the prices that will be paid fall out ... the wealth management sector is already dense in Canada.

Expansion will have to be outward. As the big banks bump up against each other, they’ll begin to compete on price. With all the competition, you have to think there is going to be pricing pressure. Profitability will be eaten up. That could affect the strategy.”

This is a risk Dodig seems to understand. In his presentation to investors, Dodig suggested he will be cautious and calculated when it comes to any growth strategy. “Our shareholders should be prepared for a very common sense, prudent approach to investing,” he said. “We’re not going to be a mainline retail bank in the US. We want to focus on a segment of wealth creation that has very attractive economic characteristics. [At the same time], we need to think about how to deploy capital outside of our home market in a smart, prudent fashion. We understand private banking and wealth management, including asset management, very, very well.” This, no one can doubt.

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COVER STORY / TOP 50 ADVISORS

THE TOP

WP ranks Canada’s top-performing advisors Here it is – Canada’s most comprehensive list of top-performing advisors. For two months this past fall, WP ran a survey asking Canadian advisors to submit basic data about their practices. We received hundreds of entries, and over the holidays, we crunched the numbers. The result is this: The second annual WP Top 50 Advisors list. Congratulations to those who’ve made the cut – it’s by no means a small feat.

As the wealth management industry matures, so does the calibre of sophisticated, successful advisors in this country. The challenges they confront are legion: low interest rates, market volatility – the list

goes on. But hopefully this ranking of star performers will serve as an example to those looking to figure out how best to juggle client and business objectives in these hectic times. The practices captured on this list embody the kind of business models that all Canadian advisors aspire to achieve. Each member of the Top 50 can, in fact, be held out as a solid example of a business model that works to satisfy client demands and needs. Their numbers bear out the assertion.

This year, you’ll notice a few tweaks to our list.

Over the last 12 months, we heard back from many in the industry, resulting in some changes in the

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way we calculate the Top 50 list. We used a combination of different quantitative criteria to decide which advisors would make it into the Top 50 – assets under management, revenue contributed to the business and AUM per client.

One other change to the list is that we’ve added a couple of supplementary rankings – one for feebased advisors, and another for those who run their practice on an embedded comp model. What model is ‘correct’ is a matter of heated debate, but it is our policy to emphasize that there is a place (and need) in the industry for competing approaches to compensation. Today, it sometimes seems, the easy opinion is to suggest that all advice should be feebased. But at some point, this could cut off many middle-income Canadians from access to advisor services – is this necessarily a good thing? As the Canadian financial advisory industry enters a unique

round of change, this debate is far from over.

The other issue we heard from advisors is that overall book size had declined a bit since last year, as advisors revamped their practices to work under the new CRM2 regulations. Congratulations to the advisors who worked through this issue but still made it on to the list.

Keep in mind that this is an annual list – we’ll be back next year. We are looking for input from the industry for tips and suggestions we should apply to the generation of this list. This is your list, so we’d love to hear from you concerning methodology.

Again, congratulations to those who made the list, especially those who made it into the top 10.

These are the advisors who are not shying away from the challenges of 2015, but instead are charting a successful path through the current economic volatility.

REGIONAL BREAKDOWN OF TOP 50 ADVISORS Average AUM: $139,023,152 Total AUM: $6,951,157,608 Average number of clients: 236

1

8

4 1

5

5

P.E.I.

1

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COVER STORY / TOP 50 ADVISORS

Top 5 advisors by assets (fee-based) RANKING NAME

1 2 3 4 5

Reg Jackson Lyle Rouleau Arthur C. Salzer Robert McClelland Eric Muir

COMPANY

JMRD Wealth Management Team Rouleau Investment Group Northland Wealth Management The McClelland Financial Group Muir Investment Team

BROKERAGE/DEALER GROUP NAME

National Bank Financial CIBC Wood Gundy

Raymond James Ltd.

LOCATION

London, Ont. Edmonton, Alta.

Markham, Ont. Thornhill, Ont. Burnaby, B.C.

Top 5 advisors by assets (embedded compensation) RANKING NAME

1 2 3

Wayne Townsend Diane McCurdy Shafik Hirani

4 5

Susan Andrighetti Cory Tucker

COMPANY

Lawton Partners McCurdy Financial Planning Inc. Shafik Hirani's Private Wealth Management Practice The Andrighetti Group CIBC Imperial Service

BROKERAGE/DEALER GROUP NAME

LOCATION

Quadrus Investors Group

Winnipeg, Man. Vancouver, B.C. Calgary, Alta.

CIBC Wood Gundy CIBC Investor Services

Toronto, Ont. Winnipeg, Man.

Top 10 advisors (increase in AUM 2013 to 2014) RANKING NAME

COMPANY

BROKERAGE/DEALER GROUP NAME

LOCATION

1

David Sutherland

CIBC Wood Gundy

Toronto, Ont.

2

Rob Tetrault

Rob Tetrault Wealth Management Group

Winnipeg, Man.

3

Jeff Ber

Ber Wealth Management

ScotiaMcLeod

Calgary, Alta.

4

Cyrilla Saunders

Saunders Wealth Advisory Group

CIBC Wood Gundy

Charlottetown, P.E.I.

5

Elie Nour

Elie Nour Group

Manulife Securities

Oakville, Ont.

6

Gene Kim

Summit Private Wealth

Manulife Securities

Montreal, Que.

7

Arthur C. Salzer

Northland Wealth Management

8

Shafik Hirani

Shafik Hirani’s Private Wealth Management Practice

Investors Group

Calgary, Alta.

9

Tom Pownall

Sigma Wealth

ScotiaMcLeod

Vancouver, B.C.

10

Lyle Rouleau

Rouleau Investment Group

CIBC Wood Gundy

Edmonton, Alta.

Markham, Ont.

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Reg Jackson JMRD Wealth Management Team National Bank Financial London, Ont. AUM growth YoY: 17% It’s hard to think of another advisor with as complete a series of credentials as Reg Jackson. He graduated from the University of Western Ontario, then followed that up with three more years of financial and economic studies. He gained 18 years of experience as a wealth manager and eight years as a branch manager in London, Ont. Today, he’s a vice president and portfolio manager with National Bank Financial, as well as a Fellow of the Canadian Securities Institute (FSCI), a Financial Management Advisor (FMA), a Certified Investment Management Analyst (CIMA) and, most recently, a Chartered Strategic Wealth Professional (CSWP). Oh, he also has his Level 2 Life Insurance license, is a Personal Financial Planner (PFP) and is fully licensed to provide investment advice in many US states.

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Job Description: 20-39_Cover Story Top 50-SUBBED-Marla 15.indd 23 Client: TD

Mechanical Specifications:

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Bleed: None

Acct. Mgr: Christian / Genevieve

Colours: 4C

Producer: Barry D

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COVER STORY / TOP 50 ADVISORS

“Always put your clients’ needs above your firm or your own – you will never go wrong” - Arthur Salzer

Arthur C. Salzer Northland Wealth Management Markham, ON AUM growth YoY: 39% Northland is just a couple years into its corporate history – but what a debut this ambitious company is making. The firm’s founder and principal, Arthur Salzer, is rapidly becoming a recognized expert on managing family wealth. The asset mix at Northland rivals that of some of the country’s large pension funds, and includes private equity, real estate and hedge funds. Approximately 65% of the portfolio is in non-public-market investments with redemption schedules that stretch out three to 10 years. There is no day trading or low-rent portfolio churning going on here – this is refined, considered, long-term estate wealth generation.

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Tom Pownall Sigma Wealth ScotiaMcLeod Vancouver, BC AUM growth YoY: 27% Tom Pownall’s practice, Sigma Wealth, applies a “360 degree” investment approach to client wealth.

The firm will allocate money across the full spectrum of investments, from indices to options to high yield bonds to sophisticated products. “We are always looking for ways to achieve asymmetrical risk-reward investments and keep a keen eye on the fees our clients pay,” Pownall says. “We know that over time high fees will erode their returns and can be an obstacle to some clients hitting their goals or maintaining their lifestyle. He meets regularly with clients. For each meeting, his office prepares an individual report two to three days in advance. A written agenda is delivered to the clients ahead of the meeting, allowing them to assess their goals against the current trajectory and make changes as required. His office also puts on regular non-financial seminars from numerous different sources, from sports psychologists to wine experts. His big issue today is “deploying the cash we have into risk adjusted cash flowing investments. Our clients need income, and this low-interest rate environment penalizes the savers who we represent.” Best advice to other advisors? “Be curious, read, and formulate your own opinions. Understand financials, really understand them before you make any recommendations. Be honest – truthfully disclose the costs and the risks of what you are recommending.”

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See the broad range of solutions at tdadvisor.com Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus, which contains detailed investment information, before investing. Mutual funds are not guaranteed or insured, their values change frequently and past performance may not be repeated. TD Mutual Funds are managed by TD Asset Management Inc. a wholly-owned subsidiary of The Toronto-Dominion Bank and are available through authorized dealers. ® The TD logo and other trade-marks are the property of The Toronto-Dominion Bank.

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Acct. Mgr: Christian / Genevieve

Colours: 4C

Producer: Barry D

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COVER STORY / TOP 50 ADVISORS

Adam Batstone Batstone Irwin-Lewis Private Wealth “I help my clients achieve peace of mind by providing trusted advice and personalized solutions to meet their financial goals,� says Batstone, who first joined ScotiaMcLeod in 2007 as an investment executive on a large wealth management team. In 2008, he took a leap of faith and started his own wealth management practice. By mid-2013 he had merged his rapidly growing practice with a colleague to form Batstone Irwin-Lewis Private Wealth.

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Lyle Rouleau Rouleau Investment Group CIBC Wood Gundy Edmonton, Alta.

AUM growth YoY: 26%

Arguably, there is no advisor in this country with a practice spanning more geographical space than Lyle Rouleau’s Edmonton-based practice. Unable to find employment in Alberta after graduating from university in the late 1980s, Rouleau made a bold decision to move to the far north.

He began working for a federally funded program designed to help create jobs in small business, then got a job with CIBC as a manager of commercial business. His keen interest in the investing and financial planning side of the business came to the forefront of many of his relationships. “As I worked with my CIBC clients in Inuvik and Yellowknife, I came to the realization that there was a strong need for unique and sophisticated investment, financial and estate planning for Northerners,” Rouleau says.

With this in mind, he transferred from CIBC’s Yellowknife branch to CIBC Wood Gundy in Edmonton in late 1997, but he made a conscious decision to continue to service the investment needs of his clients in the North. He still has a large number of clients located in the Northwest Territories and Nunavut. “The requirements of Northern clients can be quite different than those for clients in other parts of the country,” says Rouleau, “and I have to stay on top of their evolving needs.”

“I started my career as an investment advisor with CIBC Wood Gundy 17 years ago, and it is amazing to see how many clients have accomplished so many goals in their own unique financial journey. I am now at a point where I can recall like it was yesterday opening RESP accounts for clients early in a relationship, and now these same clients are withdrawing from their plans and putting their children through university,” Rouleau says. “It sounds like a cliché, but you have to listen to the needs and objectives of every single client and tailor your advice depending on what they are telling you.”

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COVER STORY / TOP 50 ADVISORS

John J. De Goey BBSL

Darren Luck Luck Financial Group CIBC Wood Gundy Windsor, Ont. AUM growth YoY: 11% Darren Luck’s Windsor-based office is progressive when it comes to client reporting. Luck has developed “Wealth Tracks,” a monthly statement that he calls a “state-of-the-art” consolidated report that summarizes what matters most to discerning investors. Designed to complement the mandated monthly statement, the report provides information on how much money was initially invested, what the investments are worth today, how much money has been made or lost since inception, time-weighted returns, dollar-weighted returns, compounded rates of return, cash income earnings trend, asset allocation, and a summary of insurance-based holdings. The report is being produced well in advance of the new CRM reporting requirement. “Clients love getting cheques and hate getting bills – make sure you send them more cheques than bills,” Luck advises.

Michael Thor Thor Wealth Management Group Thor specializes in managing the complex financial affairs of successful individuals, corporate investment accounts and trusts in downtown Toronto. Born and raised in Ottawa, Thor began his career in the financial services in 1991 as a bank manager. In 1995, Thor moved to Midland to follow his passion for investment management, joining TD Wealth as a portfolio manager in 2005.

Returning to WP’s Top 50 Advisors list for the second straight year, De Goey has literally written the book on how the financial advisory business is transforming itself into a true profession. “My focus is on building diversified portfolios that offer superior long-term, client-specific, risk-adjusted, after-tax, after-cost returns,” DeGoey says.

His core philosophical beliefs centre around encouraging significant market efficiency and the importance of cost minimization – all while respecting client viewpoints on these and other matters.

Fred Hurdman Hurdman and Associates Hurdman has earned numerous designations, including Certified Financial Planner (CFP), Chartered Life Underwriter (CLU), Chartered Financial Consultant (CHFC) and Canadian Investment Manager (CIM). He’s spent the last 36 years plying that knowledge, but his focus has remained unchanged: helping clients plan for and achieve financial health.

Sophie Lalonde Delgaty Lalonde Financial Group Lalonde holds a bachelor of commerce degree from Concordia University. She is a Certified Investment Manager (CIM) and Chartered Strategic Wealth Professional (CSWP), as well as a Fellow of CSI (FCSI).

Pravin Kumar Pravin Kumar Group CIBC Wood Gundy Vancouver, B.C. AUM growth YoY: 4% The Pravin Kumar Group has been providing advice to Vancouver-area clients since 1993. Kumar sat on the President’s Council in the years 19951997, 1999, 2002-2007, 2009. He has been on the Chairman’s Council in 1998, 2000, 2010 and 2011.

He is also on the Advisory Council to Management.

His personal experience has been that existing clients are great advocates, and referrals from clients and centres of influence (COI) are the best source of new clients. “Work hard, become discretionary licensed and develop a business model based on low fees, and regularly communicate with your client base,” he advises.

28 | JANUARY 2015

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WEALTHPROFESSIONAL.CA

Eric Muir Muir Investment Team Eric Muir, a 25-year industry veteran, is founder of the Muir Investment Team of Raymond James Ltd. Muir is a Canadian Investment Manager (CIM) and a Fellow of CSI (FCSI), as well as a top investment advisor and an Accretive Elite Advisor. He was awarded the Wealth Management Award of Excellence for Western Canada in May 2013 from his previous bank-owned firm, and he was a 2010 Finalist for the Burnaby Business Man of the Year Award.

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COVER STORY / TOP 50 ADVISORS

AJ Chase AJChase PrivateWealth Group Chase is a senior wealth advisor who provides private wealth management to select businesses, families and foundations in Canada. Chase joined ScotiaMcLeod in 2003 and has spent more than 23 years in the banking and investment industry. Before joining ScotiaMcLeod, Chase was a top-ranked financial planner for a Canadian chartered bank.

Wolfgang Klein Canaccord Genuity Wealth Management Returning to WP’s Top 50 Advisors list for the second straight year, the Bay Street executive, investor and media analyst has made a career of providing clients with sound business advice and investment strategies.

Working with Jack Hardill, Klein manages all forms of accounts, including RRSPs, TFSAs, RESPs, Cash and Margin Accounts, Trust Accounts, Pledge and Corporate Accounts.

Gordon Stockman Efficient Wealth Association *Performance for the three year period ending November 30, 2014. The inception date of the fund was November 13, 2007. † Morningstar Canadian Fixed Income Balanced Category. The indicated rates of return are the historical annual compounded total returns for the Class A units including changes in unit value and reinvestment of all distributions and does not take into account sales, redemption, distribution or optional charges or income taxes payable by a security holder that would have reduced returns. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments.

The information presented is accurate at the time of first printing, and is subject to change without notice. Management fees for Class A and Class F units are outlined in the Fund Facts and the Simplified Prospectus. Please read the Fund Facts or the Renaissance Investments Simplified Prospectus before investing. Mutual funds are not guaranteed, their values may change frequently and past performance may not be repeated. ® Renaissance Investments is offered by, 30 | JANUARY and is2015 a registered trademark of CIBC Asset Management Inc.

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Stockman has been helping clients avoid the pitfalls and embrace the advantages of a well-developed but complex financial system for several years. Stockman has experience in financial planning, estate planning and trusts, and strategic asset allocation.

Kirk Brugger Brugger Wealth Management Brugger specializes in full financial planning for his HNW clients, including corporate structure, estate planning and tax planning. Brugger has been elected to the national advisors board for both of his investment dealerships – TWC Financial and FundEx Investments. He also served on the executive board of the Keystone Centre as the director of finances and is the past president of the Brandon University Alumni Association.

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WEALTHPROFESSIONAL.CA

Laurie Bonten The Bonten Wealth Management Group As a senior vice president and senior investment advisor at National Bank Financial for the last 12 years, Laurie Bonten and her team pride themselves on tailoring solutions to specific client needs. Bonten offers each of her clients a personalized approach and customized investment portfolio, and recommends complementary financial products and services.

10%

Gene Kim Summit Private Wealth

8%

Returning to the WP Top 50 Advisors list for the second straight year, Kim has built a wealth management business created on a foundation of trust, leadership and vision. Kim helped fill a void in the financial industry by offering personalized holistic counsel to HNW clients and SME businesses across Canada.

4%

6%

2% 0% 1 year

2 years

3 years 5 years

Since inception

Renaissance Optimal Income Portfolio Category†

Peter Hodgson Hodgson and Associates With more than 26 years of experience on three continents, Hodgson’s experience spans asset management, investment brokerage, private and professional banking.

He holds the Chartered Financial Analyst (CFA) designation, is a Fellow of the Canadian Securities Institute (FCSI), and is a Life Insurance Advisor.

Rob Tetrault National Bank Financial After graduating from law school at the University of Toronto, Tetrault worked as a litigation lawyer at Aikins MacAulay Thorvaldson. After that, it was on to business school. Today, Tetrault is an award-winning portfolio manager for a stable of high-networth clients. Redefining the practice of portfolio management through transparency, honesty and dedication, Tetrault is a devoted member of his community.

Learn how Renaissance Optimal Income Portfolios meet real client needs at

realoutcomes.ca

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COVER STORY / TOP 50 ADVISORS

Wayne Townsend Lawton Partners With more than three decades of experience, Lawton specializes in helping clients make smarter decisions about their money. As a trusted advisor and business entrepreneur, Lawton utilizes his considerable knowledge and expertise in developing strategies in four key areas: wealth enhancement, wealth transfer, wealth protection and charitable gifting.

Chet Brothers Brothers and Company Financial Another second-time member of WP’s Top 50 Advisors list, Brothers formed Brothers & Company Financial, an independent financial planning and wealth management firm, in 1994 after spending a number of years at the wealth management subsidiary of a large Canadian financial institution. Brothers & Company won the Saskatchewan Better Business Bureau Torch Award in 2006 and was a finalist in 2013.

Lorne Kronish Assante Financial Management After launching his own firm (Kronish De Groisbois Inc.), Kronish joined Assante Financial Management in 1999. Kronish has worked with Giant Steps Foundation, The Gold Learning Center, and Miriam Home and Services, and has been an active member of the JPPS Bialik finance committee for the last two years.

David Ritcey Scotia McLeod Ritcey has been with ScotiaMcLeod for 21 years. As a licensed portfolio manager, Ritcey has the discretion to make investment decisions on a client’s behalf should a client desire to fully delegate day-to-day portfolio management – he is one of very few ScotiaMcLeod advisors across Canada to have this capability.

David Sutherland CIBC Wood Gundy For the past 14 years, Sutherland has managed assets for high-networth clients through the most volatile and rapidly evolving markets in history. As a CIBC Wood Gundy investment advisor, Sutherland’s education and expertise are supplemented by the research and resources of CIBC, one of Canada’s largest and most respected financial institutions.

Cyrilla Saunders Saunders Wealth Advisory Group of CIBC Wood Gundy Returning to WP’s Top 50 Advisors list for the second straight year, Saunders is a passionate champion of her clients’ best interests. A financial services professional since 1996, she has the wisdom, knowledge and experience to provide consistently sound guidance on matters pertaining to wealth.

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Rona Birenbaum Caring for Clients Founder of Caring for Clients and a second-time member of the Top 50 Advisors list, Birenbaum has imbued her firm with a holistic approach focused on a fee-for-service model. “A financial plan encompasses your cash flow, your retirement, your investments, your estate, your risks, your taxes and your progress towards your goals,� she says.

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COVER STORY / TOP 50 ADVISORS

INCOME GENERATION RISK MITIGATION

CAPITAL APPRECIATION

SMART SOLUTIONS FOR CAPITAL APPRECIATION First Asset offers smart, low cost investment solutions that address the real-world needs of Canadians, including capital appreciation. These ETFs have been built from Morningstar® Indexes, which have provided more upside and less downside relative to the broad markets, resulting in superior risk-adjusted returns.

INTL.

U.S.A

CANADA

ETF INFORMATION

ETF PERFORMANCE 2yr

SI

INDEX RISK METRICS* Up Down Sortino Capture Capture Ratio

Ticker Fund Name

1yr

FXM

First Asset Morningstar Canada Value Index ETF

7.55

18.81 16.84

112.78

54.82

1.73

WXM

First Asset Morningstar Canada Momentum Index ETF

16.92 22.05 18.19

113.13

67.16

1.42

XXM

First Asset Morningstar US Value Index ETF (CAD Hedged)

16.20

N/A

21.93

144.42

104.99

1.27

YXM

First Asset Morningstar US Momentum Index ETF (CAD Hedged)

5.99

N/A

13.12

131.88

111.42

0.83

VXM

First Asset Morningstar International Value Index ETF (CAD Hedged)

NEW ETF

128.45

85.84

0.74

ZXM

First Asset Morningstar International Momentum Index ETF (CAD Hedged)

NEW ETF

109.98

66.43

0.77

as at Nov 28, 2014

WE’LL DO THE ANALYSIS FOR YOU

Investment Advisors call us for a comprehensive portfolio comparison: 1(877) 642-1289

First Asset - Smart SolutionsTM First Asset is an independent investment firm focused on providing smart, low cost solutions that address the realworld investment needs of Canadians - capital appreciation, income generation and risk mitigation. Rooted in strong fundamentals, First Asset’s smart solutions strive to deliver better risk-adjusted returns than the broad market while helping investors achieve their personal financial goals.

Find the right solution www.firstasset.com Shafik Hirani Shafik Hirani’s Private Wealth Management Practice Shafik Hirani has been with Investors Group since 1996. During that time, he has been the recipient of some of Investors Group’s most prestigious awards. “In today’s society, so many people neglect taking an active interest in their financial picture,” he says.

*Risk metrics represent those of the First Asset ETFs’ respective underlying Morningstar Index since its inception. This communication is intended for informational purposes only and is not, and should not be construed as, investment and/or tax advice to any individual.

Particular investments and/or trading strategies should be of evaluated relativeand to eachhave individual’s circumstances. seek the adviceand of professionals, as appropriate, regarding any particular investment. There is no assurance that an exchange “I take great pride in the success clients always hadIndividuals great should enthusiasm passion for what I do.” traded fund will achieve its investment objectives. Commissions, trailing commissions, management fees and expenses all may be associated with investments in exchange traded funds. Please read the prospectus before investing. The indicated rates of return of the ETFs are the historical annual compound total returns including changes in unit value and reinvestment of all distributions and does not take into account sales, redemption, distribution or operational charges or income taxes payable by any security holder that would have reduced returns. ETFs are not guaranteed, their values change frequently and past performance may not be repeated. All performance data for the indices assumes the reinvestment of all distributions. Morningstar Index performance data results prior to November 14, 2014 for the Morningstar Developed Markets ex-North America Target Momentum Index and the Morningstar Developed Markets ex-North America Target Value Index; and prior to September 12, 2013 for the Morningstar US Target Momentum Index and Morningstar US Target Value Index and prior to February 6, 2012, for the Morningstar Canada Target Value Index, Morningstar Canada Target Momentum Index are hypothetical, but are calculated using the same methodology that has been in use by the index provider since the Morningstar Index was first published. Information regarding the Morningstar Index, including the applicable index methodology, is available at http://indexes.morningstar.com. As a result of the risks and limitations inherent in hypothetical performance data, hypothetical results may differ from actual index performance. Morningstar is a trademark of Morningstar, Inc. and has been licensed for use for certain purposes by First Asset Investment Management Inc. First Asset ETFs are not sponsored, endorsed, sold or promoted by Morningstar or any of its affiliates (collectively, “Morningstar”), and Morningstar makes no representation regarding the advisability of investing in First Asset ETFs. The ETFs are managed by First Asset Investment Management Inc.

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SMART SMART SMARTSOLUTIONS SOLUTIONS SOLUTIONS FOR FOR FORCAPITAL CAPITAL CAPITALAPPRECIATION APPRECIATION APPRECIATION

First Asset offers smart, low cost investment solutions that address the real-world needs of Canadians, First First Asset Asset offers offers smart, smart, lowlow cost cost investment investment solutions that address address thethe real-world needs of Canadians, ofprovided Canadians, ® real-world including capital appreciation.

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ETF INFORMATION ETFETF INFORMATION INFORMATION

ETF PERFORMANCE INDEX RISK METRICS* * * ETFETF PERFORMANCE PERFORMANCEINDEX INDEX RISKRISK METRICS METRICS

Up Down Sortino 1yr 2yr SI Up Up Capture Down Down Sortino Sortino Capture Ratio 1yr 1yr 2yr 2yr SI SI Capture Capture Capture Capture Ratio Ratio FXM First Asset Morningstar Canada Value Index ETF 7.55 18.81 16.84 112.78 54.82 1.73 FXMFXMFirstFirst Asset Asset Morningstar Morningstar Canada Canada Value Value Index Index ETFETF 7.557.5518.81 18.81 16.84 16.84112.78 112.78 54.82 54.82 1.731.73 WXM First Asset Morningstar Canada Momentum Index ETF 16.92 22.05 18.19 113.13 67.16 1.42 WXM WXM FirstFirst Asset Asset Morningstar Morningstar Canada Canada Momentum Momentum Index Index ETFETF 16.92 16.92 22.05 22.05 18.19 18.19113.13 113.13 67.16 67.16 1.421.42 XXM First Asset Morningstar US Value Index ETF (CAD Hedged) 16.20 N/A 21.93 144.42 104.99 1.27 XXM XXMFirstFirst Asset Asset Morningstar Morningstar US Value US Value Index Index ETFETF (CAD (CAD Hedged) Hedged) 16.20 16.20 N/AN/A 21.93 21.93144.42 144.42104.99 104.99 1.271.27 YXM First Asset Morningstar US Momentum Index ETF (CAD Hedged) 5.99 N/A 13.12 131.88 111.42 0.83 YXM YXMFirstFirst Asset Asset Morningstar Morningstar US Momentum US Momentum Index Index ETFETF (CAD (CAD Hedged) Hedged) 5.995.99N/AN/A 13.12 13.12131.88 131.88111.42 111.42 0.830.83 VXM First Asset Morningstar International Value Index ETF (CAD Hedged) NEW ETF 128.45 85.84 0.74 VXM VXMFirstFirst Asset Asset Morningstar Morningstar International International Value Value Index Index ETFETF (CAD (CAD Hedged) Hedged) NEW NEW ETFETF 128.45 128.45 85.84 85.84 0.740.74 ZXM First Asset Morningstar International Momentum Index ETF (CAD Hedged) NEW ETF 109.98 66.43 0.77 ZXM ZXMFirstFirst Asset Asset Morningstar Morningstar International International Momentum Momentum Index Index ETFETF (CAD (CAD Hedged) Hedged) NEW NEW ETFETF 109.98 109.98 66.43 66.43 0.770.77

U.S.A INTL.

CANADA

U.S.A U.S.A CANADA CANADA INTL. INTL.

Ticker Fund Name Ticker Ticker Fund Fund Name Name

WE’LL DO THE ANALYSIS FOR YOU WE’LL WE’LL DODO THE THE ANALYSIS ANALYSIS FOR YOU YOU portfolio comparison: 1(877) 642-1289 Investment Advisors call us for FOR a comprehensive

as at Nov 28, 2014 as at as Nov at Nov 28, 2014 28, 2014

Investment Investment Advisors Advisors callcall us for us for a comprehensive a comprehensive portfolio portfolio comparison: comparison: 1(877) 1(877) 642-1289 642-1289

First Asset - Smart SolutionsTM TM TM First First Asset Asset - Smart - Smart Solutions Solutions

First Asset is an independent investment firm focused on providing smart, low cost solutions that address the realFirst First Asset Asset is an is independent an independent investment investment firmfirm focused focused on on providing providing smart, smart, lowlow costcost solutions solutions thatthat address address the the real-realworld investment needs of Canadians - capital appreciation, income generation and risk mitigation.

Rooted in strong world world investment investment needs needs of Canadians of Canadians capital capital appreciation, appreciation, income income generation generation and and risk risk mitigation. mitigation.

Rooted Rooted in strong in strong fundamentals, First Asset’s smart solutions strive to deliver better risk-adjusted returns than the broad market while fundamentals, fundamentals, First First Asset’s Asset’s smart smart solutions solutions strive strive to deliver to deliver better better risk-adjusted risk-adjusted returns returns than than thethe broad broad market market while while helping investors achieve their personal financial goals. helping helping investors investors achieve achieve their their personal personal financial financial goals. goals.

Find the right solution Find Find thethe right right solution solution www.firstasset.com www.firstasset.com www.firstasset.com

*Risk metrics represent those of the First Asset ETFs’ respective underlying Morningstar Index since its inception. This communication is intended for informational purposes only and is not, and should not be construed as, investment and/or tax advice to any individual.

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Morningstar Morningstar Index performance Index performance results data results prior toprior to Index and Morningstar US Index and prior to February 6, 2012, for the Morningstar Canada Index, Morningstar Canada Target Momentum Index hypothetical, are calculated using same methodology thatUS hasTarget been use by the November November 14, 2014 14,for 2014 theTarget for Morningstar the Value Morningstar Developed Developed Markets Markets ex-North ex-North America America Target Target Momentum Momentum IndexTarget and Index theValue and Morningstar the Morningstar Developed Developed Markets Markets ex-North ex-North America America Targetare Target Value Index; Value Index; andbut prior andto prior September to September 12,the 2013 12, for 2013 thefor Morningstar the Morningstar US in Target Momentum Momentum index theUS Morningstar Index wasand firstprior published. the Index, including the applicable index methodology, is available at http://indexes.morningstar.com.

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by First Asset Investment Management Inc. First Asset ETFs are nothypothetical sponsored, index provider index provider since the since Morningstar the Morningstar Index first was published. first published.

Information Information regarding regarding the Morningstar theisMorningstar Index, Index, including including the applicable the methodology, indexlicensed methodology, is available at http://indexes.morningstar.com. at http://indexes.morningstar.com.

As a result As aof result the risks of the and risks limitations and limitations inherent inherent in in hypothetical endorsed, solddata, or promoted

by Morningstar anyfrom of itsactual affiliates (collectively, “Morningstar”), and representation regarding the advisability ofuse investing in First Asset ETFs. ETFs areManagement managed

by First Asset Investment Management Inc. performance performance hypothetical data, hypothetical resultsresults may or differ may differ from actual index performance. index performance.

Morningstar Morningstar is a Morningstar trademark is a trademark ofmakes Morningstar, ofno Morningstar, Inc. and Inc. has and been haslicensed been licensed for usefor for certain for certain purposes purposes by Firstby Asset FirstThe Investment Asset Investment Management Inc. First Inc.Asset First ETFs Asset are ETFs notare sponsored, not sponsored, endorsed, endorsed, sold orsold promoted or promoted

by Morningstar

by Morningstar or any or of any its affiliates of its affiliates (collectively, (collectively, “Morningstar”), “Morningstar”), and Morningstar and Morningstar makesmakes no representation no representation regarding regarding the advisability the advisability of investing of investing in FirstinAsset FirstETFs. Asset ETFs. The ETFs Theare ETFs managed are managed

by FirstbyAsset FirstInvestment Asset Investment Management Management Inc. Inc.

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COVER STORY / TOP 50 ADVISORS

Kate Brown Brown Wealth Management Group of RBC

Brian Lonsdale Lonsdale Financial Group

Kate Brown has been delivering professional, trusted, client-centred financial services to highnet-worth individuals and families since 1981. A graduate of the MBA program at the Richard Ivey School of Business, University of Western Ontario, she is a Certified Financial Planner (CFP), a Fellow of the Canadian Securities Institute (FCSI) and holds the Financial Management Advisor (FMA) and Certified International Wealth Manager (CIWM) designations.

With more than 15 years of investment experience, Lonsdale provides sound technical expertise and is responsible for the team’s financial planning and discretionary portfolio management. Returning to WP’s Top 50 Advisors list for the second straight year, Lonsdale is qualified to assist clients in setting up unique investment and estate planning strategies to attain their goals.

Diana Bristow Bristow Financial Group

Ted Rechtshaffen TriDelta Financial

After 16 years with BMO Nesbitt Burns, Bristow left her position as vice president and senior financial advisor to become an independent agent. After an exhaustive search, Bristow found that Raymond James was most aligned with her beliefs and offered the best valued products and services for her clients’ needs.

More than 90% of her clients are a result of referrals from other satisfied clients.

Ted Rechtshaffen moved from the consulting side of the mutual fund industry to servicing clients directly when he joined RBC Dominion Securities in marketing and business development. He was promoted to VP of Strategic Initiatives before leaving to launch TriDelta Financial, a firm built to minimize the bias and conflict found in most areas of Canadian financial services.

TriDelta has built on its reputation for providing dispassionate and holistic financial advice.

Jeff Ber Ber Wealth Management

Scott Plaskett Ironshield Financial Planning Plaskett’s passionate belief in the power of a written financial plan, as well as his commitment to independent advice, led him to start his own firm in 1993. Today, Plaskett is the senior financial planner and CEO of the fee-based firm Ironshield Financial Planning.

Martin-Charles Plouffe National Bank Financial As a portfolio manager with National Bank Financial, Plouffe prides himself on responding to his clients’ growing and complex needs. “We do a comprehensive review of our clients’ affairs and put together a roadmap prioritizing strategies to help them grow their capital, protect their assets and plan for the future,” he says.

As a wealth advisor, Ber brings an in-depth knowledge of markets and the economy, but his impressive numbers may speak more directly to his diligence on behalf of his clients’ short- and longterm financial goals. Ber’s portfolio management strategy is based on regular client contact, listening to and understanding clients’ articulated needs, and bringing quantitative research and analysis to bear on his counsel.

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Lewis Rosen Rosen Group Private Wealth Management Rosen is a senior vice president with the private client group at Raymond James, where he has been recognized as a top-performing investment advisor and has been honoured as a member of their Chairman’s Council. Rosen can be heard weekly on his “Smart Money” radio show on CJAD 800 AM and is highly sought after for his customized tax reduction strategies for Montreal’s high-networth community.

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COVER STORY / TOP 50 ADVISORS

Luke Kratz The Kratz Group at CIBC Wood Gundy Creator of The Total Confidence Program, Kratz remains devoted to the system, which uses a Simple Signal System to answer questions, making sure clients get on track and remain there as a way of protecting lifestyle and independence. “In retirement, wealth is the absence of financial worry, an income you don’t outlive and a meaningful legacy to the people you love or an institution you care about,” he says. “The hallmark of wealth is confidence. It doesn’t matter how much money you’ve got; if you’ve got worries, you’re not wealthy.” This is Kratz’s second appearance on the WP Top 50 Advisors list.

Sybil Verch The Verch Group Sybil Verch is passionate about helping women take control of their finances. In 2014, Verch was named Business Person of the Year by the Greater Victoria Chamber of Commerce in recognition of her business acumen, dedication to mentoring others in business and her tireless involvement in the community. In addition, she serves as chair of the Victoria YM/YWCA board of directors and volunteers her time in support of the Peter B. Gustavson School of Business. Verch is also chair of the Women’s Advisory Council at Raymond James and plays an active role in mentoring women in finance.

Elie Nour Elie Nour Group “I invest money you can’t afford to lose,” says Elie Nour. During his nine years at Manulife Securities, he rose to become one of the country’s leading investment advisors. From 2008 to 2010, he was ranked in the top 1% of advisors and reached the #1 position in 2011. Nour chalks up his success up a disciplined and conservative approach to investing, with an emphasis on tax reduction, a dedication in servicing his clients and leveraging of his network of expert financial professionals to better serve his clients’ financial needs.

Tim Niblett Tim Niblett/Cuttaxes Niblett’s practice creates, implements, monitors and adjusts taxadvantaged investment, insurance and mortgage solutions for clients. His philosophy is, “You can get everything you want out of life helping others get what they want.”

Cory Tucker CIBC Imperial Service As a senior financial advisor and retirement specialist at CIBC Imperial Service for the past 21 years, Cory Tucker is dedicated to providing solutions for people entering a key phase of their lives: retirement.

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WEALTHPROFESSIONAL.CA

Susan Andrighetti The Andrighetti Group Susan Andrighetti and her team provide financial planning and investment solutions for affluent clients and their families and friends. The McMaster graduate has been an influential member of national advisory councils for several financial product manufacturers, including Fidelity Investments, Dynamic Funds, Mackenzie Financial Corporation, Aston Hill Financial and CIBC Asset Management.

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COVER STORY / TOP 50 ADVISORS

Don Emond Assante Financial Management Emond is a senior financial advisor with Assante Wealth Management in Cobourg, Ont. With more than 20 years’ experience serving his community, Emond has developed a unique service offering that is very much a client-first approach to financial planning.

Tim Pritchard The Pritchard Wealth Management Group With more than 17 years of experience in the investment industry, Pritchard has dedicated his time to building relationships based on trust through his insight and ability to recognize the unique needs and goals of each client. Always active in his community, Pritchard was awarded a Civilian Citation Award by the Durham Municipality’s Commissioners of Police Board, in grateful acknowledgment of outstanding services and unselfish assistance rendered in the preservation of peace and order.

Brendan Donahue Manulife Securities Donahue is part of a hard-working team that is focused on providing exceptional customer service. He was formerly a HSBC Securities investment advisor before he established a branch at Manulife.

Ryan Meadows CIBC Imperial Investors Services For the last seven years, Meadows has provided solutions for his clients at CIBC Wealth Management. Based out of Langley, BC, Meadows manages all facets of the financial needs of the clients in his portfolio.

Robert McClelland The McClelland Financial Group John Woodfield Raymond James Woodfield is a 20-year-plus veteran in advising individuals and their families. He helps clients create income, protect assets and ensure that they transition through retirement into financial comfort. Woodfield is also the author of the book Your Ultimate Guide to Investment and Wealth Management.

McClelland is the founder of The McClelland Financial Group and a senior financial planner and co-branch manager of Assante Capital Management. An expert on how to minimize risk and maximize income during pre- and post-retirement stages, McClelland has helped thousands of investors achieve their financial goals over the past 20 years. Prior to embarking on his career in the financial services industry, McClelland was a senior executive for a successful Canadian retailer.

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Donald A. Daggett Daggett Advisory Group CIBC Wood Gundy Waterloo, Ont. AUM growth YoY: 23% Daggett prides himself on always putting clients first. “We engage our clients within our process and fully understand their stories,” he says. “We are truly advisory and provide advice in the best interest of the client.” Not only that, but he practices what he preaches: “We invest in the same things as our clients. We have our own skin in the game.” His approach has paid off in a number of referrals; the most recent brought in a $6 million client.

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COVER STORY / TOP 50 ADVISORS

Jason Pereira Woodgate Financial Pereira began his career in the financial industry in 1997 in the brokerage business. Before joining Bennett March, Pereira founded Woodgate Financial Partners with his business partner, James Collins. Pereira regularly writes articles for several industry publications.

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Top 50 advisors NAME Andrighetti, Susan

COMPANY

BROKERAGE/DEALER GROUP NAME

LOCATION

TOTAL AUM (AS OF OCT. 31, 2O14)

NUMBER OF CLIENTS

AVERAGE AUM PER CLIENT

REVENUE CONTRIBUTED

The Andrighetti Group

CIBC Wood Gundy

Toronto, Ont.

$195 million

334

$583,832

$1,400,000

Batstone Irwin-Lewis Private Wealth

ScotiaMcLeod

Oakville, Ont.

$110 million

187

$588,235

$900,000

Ber Wealth Management

ScotiaMcLeod

Calgary, AB

$59 million

78

$756,410

$233,000

Caring for Clients

Queensbury Strategies

Toronto, Ont.

$15 million

155

$743,870

$1,050,000

Bonten, Laurie

The Bonten Wealth Management Group

National Bank Financial

Winnipeg, Man.

$113 million

194

$582,474

$1,430,000

Bristow, Diana

Bristow Financial Group

Raymond James Ltd.

Milton, Ont.

$40 million

96

$416,666

$400,000

Brothers, Chet

Brothers & Company Financial

Lawton Partners

Regina, Sask.

$120 million

245

$489,796

$800,000

Batstone, Adam Ber, Jeff Birenbaum, Rona

Brown, Kate

Brown Wealth Management Group

RBC Dominion Securities

London, Ont.

$126 million

168

$750,000

$1,230,660

Brugger, Kirk

Brugger Wealth Management

Fund EX

Brandon, Man.

$121 million

238

$508,403

$1,200,000

Chase, AJ

AJChase PrivateWealth Group

ScotiaMcLeod

Hamilton, Ont.

$110 million

214

$514,019

$740,000

Daggett Advisory Group

CIBC Wood Gundy

Waterloo, Ont.

$53 million

56

$946,428

$600,000

Daggett, Donald De Goey, John Donahue, Brendan

BBSL Manulife Securities

Toronto, Ont.

$72 million

94

$767,021

$611,000

Invermere, B.C.

$145 million

415

$349,882

$696,000

$93 million

300

$310,000

$1,200,000

$200 million

607

$329,489

$4,000,000

Emond, Don

Assante Financial Management Ltd.

Hollis Wealth

Cobourg, Ont.

Hirani, Shafik

Shafik Hirani’s Private Wealth Managment Practice

Investors Group

Calgary, Alta.

Hodgson, Peter

Hodgson and Associates

BMO Nesbitt Burns

Hurdman, Fred

Hurdman & Associates

Raymond James Ltd.

JMRD Wealth Management Team

National Bank Financial

Summit Private Wealth

Manulife Securities

Jackson, Reg Kim, Gene Klein, Wolfgang Kratz, Luke

Canaccord Genuity Wealth Management The Kratz Group

$1,965,100

$760,000

$3,000,000 $2,250,000

London, Ont.

$380 million

195

$1,948,718

Montreal, Que.

$70 million

125

$560,000

$750,000

Toronto, Ont.

$106 million

207

$512,077

$250,000 $1,281,692

190

$728,766

$60 million

198

$303,030

$250,000

CIBC Wood Gundy

Vancouver, B.C.

$135 million

170

$794,117

$1,742,000

Delgaty Lalonde Financial Group

CIBC World Markets

Montreal, Que.

$100 million

107

$934,579

$875,000

Lonsdale Financial Group

CIBC Wood Gundy

Ottawa, Ont.

$121 million

300

$403,333

$675,000

Luck Financial Group

CIBC Wood Gundy

Windsor, Ont.

$202 million

225

$897,777

$922,000

Thornhill, Ont.

$300 million

699

$ 430,477

$3,401,789

Surrey, B.C.

$147 million

331

$ 444,108

$847,000

Burnaby, B.C.

$288 million

462

$624,240

$2,200,000

Pravin Kumar Group

Lalonde, Sophie Lonsdale, Brian

The McClelland Financial Group

Meadows, Ryan

CIBC Imperial Service

CIBC Imperial Investors Services

Muir, Eric

Muir Investment Team

Raymond James Ltd.

Niblett, Tim

Tim Niblett/Cuttaxes

Raymond James Ltd.

Elie Nour Group

Manulife Securities

Nour, Elie

$882,608

250

$138 million

Kumar, Pravin

McClelland, Robert

230

$190 million

Victoria, B.C.

Assante Financial Management

Luck, Darren

$203 million

Calgary, Alta.

Montreal, Que.

Kronish, Lorne

CIBC Wood Gundy

Collingwood, Ont.

Burlington, Ont.

$56 million

200

$280,000

$500,000

Oakville, Ont.

$207 million

350

$591,428

$2,450,000

Pereira, Jason

IPC Securities Corp.

Toronto, Ont.

$170 million

550

$309,091

$1,600,000

Plaskett, Scott

Ironshield Financial Planning

Toronto, Ont.

$75 million

181

$414,365

$1,200,000

National Bank Financial

Brossard, Que.

$56 million

238

$235,294

$650,000

Vancouver, B.C.

$120 million

110

$1,090,909

$1,200,000

Plouffe, Martin-Charles Pownall, Tom

Sigma Wealth

Pritchard, Tim

ScotiaMcLeod

The Pritchard Wealth Management Group

RGMP

Toronto, Ont.

$145 million

200

$725,000

$1,400,000

Rechtshaffen, Ted

TriDelta Financial

TriDelta Investment Counsel

Toronto, Ont.

$80 million

103

$776,699

$1,300,000

Ritcey, David

The Ritcey Team

ScotiaMcLeod

Kentville, N.L.

$92 million

206

$446,602

$878,000

Rosen, Lewis

Rosen Group Private Wealth Management

Raymond James Ltd.

Montreal, Que.

$125 million

450

$277,778

$1,900,000

Rouleau, Lyle

Rouleau Investment Group

CIBC Wood Gundy

Salzer, Arthur

Northland Wealth Management

Saunders, Cyrilla

Edmonton, Alta.

$347 million

230

$1,510,561

$1,748,126

Markham, Ont.

$343 million

140

$2,451,046

$2,700,000

Saunders Wealth Advisory Group

CIBC Wood Gundy

Charlottetown, PEI

$125 million

290

$ 431,034

$1,730,000

Stockman, Gordon

Efficient Wealth Management

Tactex Asset Management

Mississauga, Ont.

$53 million

106

$504,717

$500,000

Sutherland, David

CIBC Wood Gundy

Toronto, Ont.

$32 million

60

$533,333

$117,000

Winnipeg, Man.

$100 million

350

$285,714

$700,000

Midland, Ont.

$163 million

140

$1,164,286

$1,800,000

Winnipeg, Man.

$215 million

470

$457,447

$1,500,000

Winnipeg, Man.

$185 million

300

$616,666

$1,250,000

Victoria, B.C.

$86 million

137

$632,940

$793,582

Kelowna, B.C.

$60 million

162

$370,370

$625,000

Tetrault, Rob

Rob Tetrault Wealth Management Group

National Bank Financial

Thor, Michael

Thor Wealth Management Group

TD Wealth Private Investment Wealth

Townsend, Wayne

Lawton Partners

Tucker, Cory

CIBC Imperial Service

CIBC Investor Services Inc.

Verch, Sybil

The Verch Group

Raymond James Ltd.

Woodfield, John

Raymond James

JANUARY 2015 | 43

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BE AN AWARD-WINNING ADVISOR

COVER STORY / TOP 50 ADVISORS

An Extravagant Evening of Excellence The Wealth Professional Awards brings together industry leaders to celebrate excellence in the wealth management industry and is designed to recognize individuals, teams, and companies for their outstanding achievements and contributions to the field.

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Start Your Nomination Campaign 20 Individual and Organizational Awards Include: • Advisor of the Year • Advisor Network/Brokerage of the Year • Business Development Manager/ Wholesaler of the Year • Young Gun of the Year • Community Service Effort of the Year • Best Practice - Independent Advisor Office

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FEATURE / RRSP SPECIAL

THE RRSP FORECAST FOR 2015

RRSP SEASON IS UPON US. HERE’S EVERYTHING YOU NEED TO KNOW ABOUT MARKETS, INVESTMENTS AND MUTUAL FUNDS FOR 2015 – BEFORE THE CLIENTS ARRIVE GENERAL ECONOMIC OVERVIEW

2015 COULD BE A FINE VINTAGE

What a year. Volatility picked up through the end of 2014. Big sell-offs arrived in December.

Canadian assets took a beating. The TSX lost triple digits in a day. Euro worries returned. The Chinese stock market gained 50%, and then lost 5% in one day. Will markets hold on in 2015?

A godsend for consumers has been the much-discussed plunge in the price of crude oil.

The decrease in the cost of energy is allowing an American economic recovery to flourish. Since the collapse of Lehman Brothers in back 2008, an unprecedented central bank stimulus has kept the American economy on life support. But now it finally seems to be chugging along on its own.

The lower price of oil is putting hundreds of millions of dollars into the hands of American consumers daily. The unemployment rate in the US is now below 6%. Earnings are up 4% monthover-month. M&A activity in America was the best in 2014 since 2007. The year ahead actually looks good for the United States.

“The US economy is clearly showing some kind of recovery,” says James Dutkiewicz, chief

investment strategist and head of fixed income for Sentry Investments. “Capitalist economies don’t die of old age. Expansions continue to grow.

More actors in the economy are seeing more activity. Momentum tends to build until it’s hit by a shock. We don’t think the slow growth in Europe and Asia will affect the US, except at the margins. These issues won’t be a shock that could derail the recovery.”

One potential shock fund could be an aggressive Federal Reserve. Some fret that Fed chair Janet Yellen, eager to raise rates, could act too soon, tempering any economic recovery. But Dutkiewicz doesn’t worry. “They will be modest,” he says. “We could see modestly higher rates, but nothing dramatic – nothing in the 3% to 4% range that some suggest.”

One market prognosticator sees the S&P 500 rising more than 10% by the spring of 2015. “Low oil prices and a rising dollar have worked in the past to spark the world’s most oil-dependent economy,” Dutkiewicz says. “Hopefully this prescription will work again.”

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THE GLOBAL OUTLOOK

VARYING GROWTH WILL LEAD TO DIVERGENT POLICIES Across the pond, the EU central bank continues to battle the deflation that has seen the EU continue to teeter on the edge of recession. Few expect much in the way of growth there. In the case of the world’s largest economy, China, officials there are engaged in an epic balancing act – the government is trying to stave off a giant ‘growth downdraft’ by experimenting with new monetary actions.

If there is one common theme among the many various end-of-year forecasts, it is ‘divergence.’

“After shaping global economic and market realities the past five years, the major central banks appear headed in divergent directions in 2015,” said Andrew Pease, global head of investment strategy at Russell Investments, in his company’s year-end outlook. Manulife chief economist Megan E. Greene also suggested that varying growth could lead to divergent paths for central banks in her end-of-year outlook. “The year ahead is likely to see the global economy caught in a tug-of-war between a modest recovery in the US on one hand and a slowdown in China and low to no growth in Japan and Europe on the other,” she wrote. “We expect these competing influences to keep global growth bumping along a baseline of around 2.5 percent.”

The 2015 investment outlook from major fund manager BlackRock touched on the theme as well.

The BlackRock outlook suggests that while the US and UK are expected to tighten monetary policy, other major economies will loosen. The sum total of diverging central bank policies will keep the

global economy in a holding pattern. “Japanese equities and European equities [look good] due to cheap valuations and monetary boosters,” the BlackRock outlook suggests. The world’s largest fund manager also prefers credit sectors like US high yield and European bank debt over sovereign debt, and US Treasuries over the other safe-haven bonds. “We [also] like income-paying real assets such as property and infrastructure, but want to get compensated for being illiquid.”

One ‘contrarian’ idea BlackRock commentators mention: “beaten-up natural resources equities as a hedge if US dollar strength fades. The foundation for a strong US dollar is in place, yet the journey to longterm appreciation is tricky. Expect a bumpy ride.”

When it comes to emerging markets, 2015 will see polarization between countries that have addressed their macroeconomic imbalances and those that have not. India is the clearest example of the former, and some expect Indian assets to trade well, as well as Turkish equities. South Africa and Brazil are in the opposite camp. For the past several years investors have heard about the investment opportunities in Brazil, Russia, India and China, the so-called BRIC countries. But with the ruble crashing, China slowing and Brazil also showing signs of stress, the trend is turning toward economic opportunities in the so-called MINT countries: Mexico, Indonesia, Nigeria and Turkey. New reforms in these countries are paving the way for outsized growth over the years ahead, according to experts.

CHINA’S PROJECTED GDP GROWTH (%) 9.3

7.6

7.7

7.4

7.1

7.0

2011

2012

2013

2014

2015

2016

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FEATURE / RRSP SPECIAL

Crude Oil spot price per barrel (WTI)

150 120 90 60

OIL AND ENERGY PRICES

30 0

jANUARY 2000

DECEMBER 2014

DOMESTIC CANADIAN OUTLOOK

SLOW AND STEADY WINS THE RACE Most commentators think Canada’s near-term economic growth in 2015 will trail the United States.

But Canadian growth will remain stronger than most other G7 countries. Sure, slower global growth could impact demand for Canadian resources, but this country is a mouse next to an elephant. Any improvement in the US economy “will benefit Canada in the form of stronger export volumes in 2015,” according the year-end outlook from analysts at Russell Investments.

It’s interesting to note how rapidly the forecast for growth in Canada shifted in the late months of 2014. Alberta was generally considered the growth engine of Canada, and Ontario the weak partner. But that’s all changed now that the price of oil is low. A flurry of reports near the end of the year suggested Alberta would struggle while Ontario and Quebec would do well, which is a rapid shift in narrative.

Overall, private consumption is forecast to grow more slowly in 2015. Elevated housing prices and high household debt levels will temper the consumption of the average Canadian. According to Russell, the S&P/TSX will end the year at about 15,000. A dovish central bank, coupled with contracting short-term yield spreads between Canada and the US, means the Canadian dollar has more downside than upside risks. The currency will hover in a range of $0.84 to $0.92 USD in 2015. The BoC is expected to hold its target rate of 1.0% for most of 2015. There is the potential for one rate hike toward the end of the year, but forecasters suggest the BoC will prefer to wait for the Fed to begin increasing rates, and then assess how the US economy responds. Mid- to longer-term bond yields are expected to head higher in 2015; Government of Canada 10-year bond yields are expected to be in the 2.50% to 2.75% range by year-end.

3.0

3.0

2.0

1.0

2005

2006

2007

2008

CANADIAN GDP GROWTH (%)

2009

3.0

3.0

2.0

2.0

2010

2011

2012

2013

-3.0

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OIL AND ENERGY

HOW LOW CAN PRICES GO? As the commodity boom went bust, the price of copper and oil plunged, and the vast majority of the funds in the resource sector have posted losses. But the Fidelity Global Natural Resources Fund managed to notch a positive return. How did they do it? “We avoided the mining sector,” Joe Overdevest, the fund’s co-manager, told a gathering of business journalists.

Overdevest went on to explain how and why the price of oil plunged through the last half of 2014.

The first leg of the bear market saw the price of a barrel fall from $100 to $80 USD, a result of rising US shale production and less dire than expected outages in countries like Libya and Syria. “What brought us lower than that was when Saudi Arabia came out of the OPEC meeting and said ‘We’re okay with $70 a barrel,’” Overdevest adds. Since then, oil has fallen to $60 a barrel. But the big question is, how long will the low prices last?

Some suggest oil is slipping into a new secular phase in which the price will be around $50 a barrel.

There are reasons to believe so. The Shia government in Baghdad finally signed an agreement with the Kurds to share oil revenue. Total production in Iraq has climbed to 2.9 million barrels a day, the highest production since 1980. In addition, the American shale boom continues.

But many others suggest lower prices will not stick around. As the price has plunged, oil companies have announced cuts to capital spending. The number of drilling rigs at work is dropping, and oil companies are laying off workers. As natural depletion in existing wells goes on, as future production is cut, the next price spike is already forming up. “There was lots of capex in 2014, and that will carry through most of the year. But decline rates in existing fields are the thing,” says Overdevest.

“If capex went to zero in North America next year, production would decline by 30%. As capex is cut, there will be an effect on production over time.”

These effects could appear by the latter half of 2015, says Overdevest. There is, he says, a “material amount of oversupply. This could keep things from rising.” But it might also be the case that the “market

will be smart and will not go down the last few legs.”

The next leg up could begin before a deeper bottom occurs. There are many who think this scenario likely.

In a recent report for the Post Carbon Institute, former Ministry of Natural Resources geologist David Hughes suggested that the shale story in the United States is not as cheery as many think. “Fracking won’t last as long as you think,” Hughes says. “It’s unsustainable at this price.” His research finds that the average three-year decline rates on shale wells are 85%. Overall, fracked shale wells decline 45% per year. “Plays are not uniform. They have sweet spots,” he says. Once the drilling moves beyond these sweet spots, Hughes says, the boom will begin to lose a bit of its current lustre. “Many of the juiciest spots of the shale beds have already been tapped. You are going to need double the price to drill the rest of the play.”

According to Hughes, the flow of oil from fracked shale will peak by 2020, rather than 2040, as many optimists have predicted. “The IEA is assuming a million barrels a day in 2040. I think actual production is going to be less than a tenth of that. If they keep drilling at the rate they are, I see a couple of good years in which production will be above IEA projections. The price will have to go back up, most likely by mid-next year.”

There are many betting that the price of oil will higher sooner rather than later; among those is Russian leader Vladimir Putin. In a televised press conference, Putin predicted the current volatility would pass within “two years.” Another big name betting on a rapid rebound in oil prices is Continental Resources CEO Harold Hamm, who has profited more than anyone off the US shale boom. He recently sold all the hedges the company held on future price of oil, going all-in on his bet that prices will rise sooner than later. Both Hamm and Putin seem to understand that marginal production sources, the place where prices are set, are expensive sources like fracked shale, tar sands and ultra-deepwater oil. The price will eventually have to go back above $80 to sustain new production. As Overdevest puts it, “The best cure for low prices is low prices.”

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FEATURE / RRSP SPECIAL

THE BOND MARKET

HOW TO GET THE MOST OUT OF LOW INTEREST RATES Every advisor knows the score: Interest rates are lower than ever, making it tough to provide a flow of fixed income for clients. That challenge will persist in the year ahead. Pat Chiefalo, managing director and head of product for iShares Canada, has some suggestions about how to play fixed income.

“You have to pick your entry point,” he says. “If you can make a couple of shrewd entry points, you can get some capital gains.” But he doesn’t think yields will rise very much in the year ahead.

“We think this period of time looks like 2004 and 2006, when rates went down to 1% and Greenspan kept them there,” Chiefalo says. “When Greenspan gradually raised rates, long-term rates didn’t go up.” At that time, money from cash-rich OPEC countries and China was coming into the American economy. Investors were borrowing money at low rates elsewhere, and then investing that money in a rapidly growing US economy. “This will be the case again,” Chiefalo says. If some central banks are offering cheap money, but the US dollar is rising, there will be room for a so-called ‘carry trade.’ If you can borrow at two and compound at six, that should create an arc of investment that will see money go into the US. It reminds me of ‘04 and ’06 – a lot of people were engaging in this carry trade. This resulted in a global capital glut. For two or three years, this suppressed

2.5 2.0

interest rates. I suspect we’re in the same position right now.”

In this kind of environment, Chiefalo has a warning: “Don’t chase the market. When you chase 25 basis points in more risky credits, you can get burned. Investors may not appreciate the lack of liquidity in some markets. There is a lot of yield-seeking behaviour out there because of how low rates are.” Chiefalo suggests bond ETFs have a key role to play here. “The bond markets are increasingly illiquid … clients should and need to diversify their rate exposure. That’s difficult to do when you’re accessing the underlying bonds. With fixed income ETFs, at least you can see these things are traded on an exchange. There is access to liquidity that you don’t have with regular bonds.

As for duration, “Even though rates may not go higher in a hurry, focus on the shorter end,” Chiefalo advises. “You’re not getting compensated for being further out on the curve. Stick to seven to two years to yield. Even minor moves can wipe out a lot of yield.” He says investment-grade, high-quality corporate and government bonds are the way to go. “People are buying shorter duration, investment-grade ETFs. Costs are very important.

We’re urging investors to pay close attention to this. Mutual funds are expensive. In this market, every basis point counts.”

THE BOND MARKET

CURRENT CANADIAN T-BILL AND BOND YIELD Bonds T-Bills

1.5 1.0 0.5

1-month

3-month

6-month

1-year

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FEATURE / RRSP SPECIAL

Another reason for optimism: American consumers and companies have de-leveraged by reducing their outstanding debt. As a result, unlike Canadians, who are still highly leveraged, American consumers are less indebted than they have been in many years.

This is creating space for the US consumer economy to recover.

CFAs CONFIDENT ABOUT 2015

ANNUAL SURVEY REVEALS RISKS AND REWARDS The CFA Institute’s 2015 Global Market Sentiment Survey of 5,000 chartered financial analysts suggests that CFAs are generally positive on the year ahead.

The US and China are the top picks for equity market performance this year, though the US was chosen as the standout market more than three times more often than any other.

CFAs expect only nominal gains in markets, predicting that the S&P will gain 4.8% over the year, rising to 2066; the Euro Stoxx 50 will advance 1.9% to 3,283, and the Nikkei 225 will increase 1.6% to 16,428. The yield on a 30-year US Treasury is expected to increase from 3.21% to 3.46%, and CFAs expect the price of gold to increase to $1,216/ oz. and crude oil to finish the year at $91 a barrel, suggesting shorter-term volatility rather than a secular shift for the latter.

On average, CFAs expect the global economy to expand 2% in 2015. This is lower than the cur-

rent World Bank forecast for global GDP to grow by 3.4% in 2015. Of those surveyed by the CFA Institute, managers in France and Germany were most optimistic about global growth, while managers in China and Australia were the most pessimistic.

The survey also polled CFAs on some of the ‘underestimated’ risks to the population.

Interestingly, 35% of respondents named the global political situation as the biggest underestimated risk to the global economy. The second biggest underestimated risk was the aging population.

This was especially true among Canadian CFAs, 26% of whom named this as their biggest worry.

By 2050, 31% of the Canadian population will be 60 years or older. “People haven’t saved enough,” says Sue Lemon, CEO of Toronto’s CFA Society.

“As they move into retirement, that’s going to affect consumption.”

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TAX ALPHA AND TFSAS

THE BIGGEST EMERGING TAX TRENDS With bond yields so low, advisors are looking for any way to generate cash for clients. Enter ‘Tax Alpha’ – the idea that advisors can generate return for clients by finding and exploiting tax savings.

The other big tax story continues to be confusion around Tax-Free Savings Accounts. Introduced in 2009, these tax vehicles have been one of the biggest changes in the Canadian market since the introduction of RRSP accounts. But a recent BMO report found almost half the respondents still don’t understand the rules around TFSAs.

Here is the rule: If you maximize your allowable contribution in a certain year and then withdraw money after that (in the same year), you can’t make another contribution in that year. If you do, the excess amount will be penalized by the Canada Revenue Agency at 1% per month until the excess amount is either withdrawn or becomes part of the eligible contribution room for the next year.

According to BMO, approximately 10% of Canadians with TFSAs have over-contributed to their plans in the past, paying average penalties of $413.

1/3

PORTION OF CANADIANS AGED 65 OR OLDER WHO ARE CONCERNED THEIR FINANCES WON’T COVER RETIREMENT

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FEATURE / RRSP SPECIAL

WINPAK LTD.

EQUITABLE GROUP INC.

TSE: WPK WINNIPEG-BASED MANUFACTURER OF PACKAGING MATERIALS $34.35 CAD MKT CAP: $2.2B FORWARD P/E: 17.1

TSE: EQB TORONTO-BASED FINANCIAL SERVICES COMPANY THAT OFFERS MORTGAGES TO NON-BANK BORROWERS $56.00 CAD MKT CAP: $863.1M FORWARD P/E: 6.80

AWARD-WINNING STOCK TIPS

MAWER INVESTMENT MANAGEMENT PORTFOLIO MANAGER JEFF MO SHARES HIS TOP PICKS FOR 2015 Mawer Investment Management cleaned up in terms of awards this year – the Alberta-based manager continues to impress with outsized performance. Jeff Mo, a Small Cap Cdn Equity portfolio manager at Mawer, told WP what picks he’s considering this year.

One name he mentions, Winpak, is a Winnipeg packaging company that manufactures plastic films and wraps for the food packaging industry.

“It’s a very stable company. Input costs had risen as the price of energy went up. The reason we like Winpak – they have very strong competitive advantages in the segments they are in.” One of those segments is manufacturing K-cups for Keurig coffee makers. “They have 50% market share in the cups and around three quarters of all foil lids.

This little company in Winnipeg has a competitive advantage because of their technology and their great customer service to Keurig.” Analysts expect EPS to be 26% higher in 2015 than in 2014.

Mo also likes Equitable Group, an alternative mortgage lender that provides loans to customers with less-than-perfect credit ratings, charging one to three times higher than traditional banks.

“Canadian non-prime lenders and those in the US are much different. Canadian lenders are very conservative. Here, banks only lend 60% to 80% of the value of the home. Equitable is very nuanced in how they choose to lend. If you look at results, they have a trailing return on equity of 18% and have grown their earnings by double digits every year for the last five years.”

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REAL ESTATE

LASALLE INVESTMENT MANAGEMENT OFFERS ADVICE FOR INVESTING IN THIS MARKET IN THE COMING YEAR The real estate sector is “late in the capital cycle.

It may be closer to a down phase than an up-cycle,” suggests Chris Langstaff, senior vice president of research and strategy at LaSalle Investment Management in Toronto, which manages $53 billion in open- and closed-end funds in the real estate sector. Nevertheless, the REIT market “probably did a little better than expected in 2014.” When refinancings got hit, it knocked 18% off the REIT index. That sector has recovered only partially, 12% year-over-year. But it is moving in the right direction, says Langstaff. “In 2013 many of the REITs backed out of the acquisition market after a very aggressive 2012. They were out for about 12 months.

In the last year, they have started to make direct acquisitions.”

With interest rates in Canada likely to remain close to current levels, capitalization rates are also expected to hold at about the same levels they have been for the past two years. Pricing is expected to remain relatively unchanged in 2015. Commercial real estate in Canada will continue to remain fairly

NEW HOME PRICE INDEX 2013 109.9 2012: 108.8 2011: 105.6 2010: 103.1

valued, relative to historical return spreads over government bond yields. “Real estate spread should give you a 300-350 basis point spread over bonds,” Langstaff says. In a world in which capital gains are tempered, when it comes to real estate, “the bulk of return is going to come from income,” he adds.

Industrial properties remain LaSalle’s top sector pick for Canada in 2015. “We think that sector is undersupplied. Vacancy rates are less than 5% ... that segment is doing well. It’s not overbuilt yet.”

But one of the big trends of the last few years has been the mass migration of young millennials into downtown urban cores. As a result, online companies are setting up distribution centres for online delivery of goods downtown to service the new populations. “We see better opportunities in the downtown fringes,” Langstaff says. “That is attractive to the tech sector, attractive to millennials.

Reposition something – an older, small industrial building for the people who are living and ordering downtown. That’s the model they’re moving to in US. The urbanization trend still has room to grow.”

1.5 MILLION

PREDICTED NUMBER OF HOUSING STARTS IN THE US THIS YEAR

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FEATURE / RRSP SPECIAL

LOOKING FORWARD

DONALD G. TAYLOR, CHIEF INVESTMENT OFFICER FOR FRANKLIN EQUITY GROUP, OFFERS HIS OUTLOOK ON THE YEAR AHEAD We are favourably biased toward the US equity market. Economic growth continued to be quite solid in the fourth quarter of 2014. Although US monetary policymakers seem likely to raise the federal funds rate above the zero bound at some point in 2015, substantial economic stimulus is already in the pipeline as a result of substantial declines in long-term interest rates and many commodity prices, particularly oil, over the course of the past year.

Despite considerable angst, the major US stock market indexes finished 2014 with strong annual returns again. There were some surprises, however. US economic growth was weak in 2014’s first quarter because of severe winter weather. By the spring thaw, many global growth forecasts were ratcheted down as growth slowed in major emerging markets such as China and Brazil, as well as in developed economies in Europe and Japan.

Consensus expectations for rising long-term interest rates proved to be stunningly incorrect, with 10-year Treasury yields falling from about 3% to only slightly higher than 2%. As a result, ‘bond-like’ portions of the US equity market, such as utilities, were surprisingly strong performers.

With a soft global economy, true growth stocks like consumer technology bellwethers and various biotechnology firms were market leaders. By the year’s second half, the weak demand environment put severe pressure on the globally sensitive energy sector. Later in the year, consumer-oriented stocks were market leaders, as they tended to benefit from falling gasoline prices and a stronger US dollar.

Back to 2015 – much has been made of the end of quantitative easing and the perceived inevitability of the first US monetary tightening cycle in many years. We believe low commodity prices will likely support US economic growth. However, they are also likely to delay the onset of inflationary pressures, which should enable the Federal Reserve to be measured with respect to the pace

of removing monetary stimulus. As a result, the Fed is unlikely to be too much of an impediment to further equity market performance potential, in our view.

Sector leadership could be much different in 2015, however. Increasing confidence in US economic growth is likely. As a result, long-term interest rates could finally move somewhat higher. Such a move would make it difficult for bond proxies, like utilities, to continue their strong performance.

We think the tail winds supporting consumer stocks should continue, although their recent strong performance may limit future gains. With growth becoming more plentiful, at least outside the energy sector, many value stocks could begin to look more appealing relative to growth stocks that tend to perform well when growth is scarce.

Even energy stocks could show favourable performance potential, given how far many of them have already fallen.

We were encouraged by the dividend growth rates of companies in our rising dividends portfolios during 2014, and we think similar dividend growth potential is possible in the coming year, although results in the energy sector may be less than in the recent past, given the significantly lower price of oil. With falling interest rates, higher-yielding stocks tended to outperform dividend growth-oriented stocks during 2014. If interest rates finally move higher, we believe dividend growth potential may receive greater investor focus.

Overall, the market environment looks favourable to us in the coming year. We think US economic growth above long-term averages, continued solid employment growth, very little inflation with minimal risk of deflation, and reduced fiscal drag that probably offsets a slightly less accommodative Fed all could be likely. Although equity values as of the end of 2014 were not as attractive to us as they were five years ago, we think certain stocks could continue to exhibit attractive performance potential, given the current backdrop.

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COMPANY FOCUS / 3MACS

3

MACS ATTACKS

One hundred and sixty years into its history, Canada’s oldest wealth management company finally gets around to settling the West

By Jeff Sanford It was 1840 when a 29-year old Scot named Lorn MacDougall landed in Montreal. Quebec was still called Lower Canada. The Bank of Montreal was just 23 years old. Steamships were new. The telegraph had just been invented. The rebellions of the 1830s had just been quelled. As the 1840s dawned, it was a good time to get into business.

Young Lorn began trading the basic commodities of the day – flour and grain, some timber, but also money. Advertising his services in the newspaper, MacDougall self-identified as a Produce and Bill Broker. From the very start, he had a reputation for being trustworthy. His business flourished. MacDougall became a respected, influential member of the nascent financial elite.

When the Montreal Board of Trade was created in 1841, MacDougall was a founding member. By the 1850s, Montreal brokers began to specialize, trading either commodities or financial instruments.

The stock trading that had gone on in coffee houses would find a permanent home when the Montreal Stock Exchange was founded in 1862. MacDougall was the first chairman. Eventually, he began handling the investments of many of the city’s leading figures. By the time Canadian Confederation rolled around, MacDougall & Brothers was trading stocks in Montreal, London and Toronto.

MacDougall was a well-respected financial sage.

When Alexander Graham Bell patented the telephone, the bankers floated a prospectus for a new company called Bell Canada. But with no company history, the bankers running the deal realized they needed to generate some trust among investors, so they publicized the involvement of the Bank of

Montreal, with Lorn MacDougall on the front page of the prospectus.

When MacDougall died in 1885, the Montreal papers ran many stories. One writer pointed out that MacDougall’s success was partly a result of his “independence.” He was considered a breed apart from the brokers who had a reputation at the time for self-dealing and non-transparent deals. Lorn MacDougall suffered none of these complaints.

More than a century and a half later, MacDougall’s defining traits – independence and careful, conservative management – still shape the culture at the firm he founded: MacDougall, MacDougall & MacTier, better known to modern Canadians as 3Macs.

NEW DIRECTIONS Five generations of MacDougalls have come and gone at 3Macs, and the family is still involved in the firm today. But after two decades of relative stasis, the board also realized there was a need for some new blood in order to maintain its high level of service in a modern marketplace. In 2012, Randy Ambrosie was hired as the new CEO of the country’s oldest wealth management firm.

If the name Ambrosie sounds familiar, it should.

He’s a bit of a celebrity in both the advisory business and the sports world. Ambrosie first made his mark when he was drafted into the CFL in 1985, where spent more than a decade as an offensive lineman with the Edmonton Eskimos, eventually winning a Grey Cup ring.

But Ambrosie wasn’t just a jock. Two years into his football career, he joined Nesbitt Thomson as a stockbroker. “I was in the investment industry

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“I try to remind myself every day I am the steward of a great history” Randy Ambrosie

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COMPANY FOCUS / 3MACS

Donald Lorn MacDougall

Hartland St. Clair MacDougall

that entire time. For me, it was what I wanted to do,” he says. “I loved playing football, but probably the reality is that I liked business.”

After subsequent stints at Midland Walwyn and Merrill Lynch, Ambrosie was named president of AGF Funds in 2006. While there, he pioneered one of the most fascinating investment products of all time, the Elements portfolio, a fund designed to pay rebates to investors if returns fell short of performance benchmarks. The product turned a lot of heads at the time, but it couldn’t save the ailing AGF. It was time for Ambrosie to move on to 3Macs.

“There was a lot of overlap with what I saw as the potential of the firm and what the directors wanted,” he says. “I think they believed that this place is special – and I can honestly tell you that it is – but they were looking for someone to reveal its potential. I was asked to come in and build a growth strategy – one that was rational. Not a Pollyanna, pie-in-the-sky version, but a real, downto-earth, very achievable strategy.”

The first part of that strategy was a technology upgrade. In August, 3Macs announced an investment in a state-of-the art technology platform with Fidelity Clearing Canada ULC. The goal is to build a solid core platform that advisors can plug into in order to manage a modern practice. “What we found was that the marketplace is looking for a firm that can provide a great home for investment professionals who don’t want someone selling those products all the time and pushing their internal strategies, but rather a firm that can provide an environment to make their own decision on behalf of their clients. And I think we’ve done a great job of that,” Ambrosie says.

Another part of the plan is to bring some new offices into the firm so that the company can reap

the economies of scale necessary to make it in today’s world. Earlier this year, 3Macs announced the acquisition of two Desjardins Securities branches located in Toronto and North York. More recently, 3Macs announced the acquisition of Toronto-based Castellum Capital Management, which has a 17-year history specializing in sustainable and responsible investing products for private investors, institutions and foundations.

The great hope is that the company can grow assets from $6 billion under management to $10 billion by 2020. To do this, 3Macs will finally begin to move West. In the early days, the majority of the company’s assets were in Quebec. Today, assets and revenue are slightly tilted in favour of Ontario.

Now, as has been the history of the country, the financial weight continues to move westward.

According to Ambrosie, the company plans “to have one branch or operation out West by the end of the calendar year”; candidates include Alberta, southern B.C. or possibly Ambrosie’s hometown of Winnipeg.

But there’s no rush. The company hasn’t survived this long by being hasty or unconsidered.

“We’ll take a slow and cautious and approach,” Ambrosie says. “I try to remind myself every day I am the steward of a great history. I try to do everything possible to be respectful of this firm’s history and longevity. We’re especially careful to make sure we find the right people. This isn’t a heavy-handed place; this is a place built on deep, personal relationships. So, that’s really what we’re building – an environment where an investment team sees us as a place where they can operate their practice in a way that brings credibility to themselves, and ultimately brings success to their clients.”

DEEP HISTORICAL PERSPECTIVE 1844

Donald Lorn MacDougall, one of the first brokers in Montreal, establishes the city’s first stock brokerage

1849

Lorn MacDougall joins with his brother to establish MacDougall Brothers

1874

Lorn MacDougall and his brother become founding members of the Montreal Exchange

1885

1921

MacTier & Co. to become 3Macs. Mergers with Burnett & Company, Marler & Marler, Moat & Co. and Molson & Rousseau follow

Mid-1990s

1914

1959

1975

2014

Lorn MacDougall dies and is succeeded by his brother as head of the firm, which includes several family members Hartland B. MacDougall, Lorn’s nephew, wins a Stanley Cup with the Montreal Victorias; ends up head of the Montreal Exchange after a stint at the family firm

Hartland MacDougall forms a partnership with Robert E. MacDougall (no relation) to create MacDougall & MacDougall Bart MacDougall establishes the first office in Toronto

1960

The firm merges with

Barry & McManamy is acquired. An office is opened in Quebec City

1990

An office is opened in London, Ontario

3Macs is one of the country’s largest independent firms. Staff reaches 125; ownership is opened up to employees 3Macs signs technologybased deal with Fidelity Clearing Canada ULC, and acquires Castellum Capital Management and two Desjardins Securities branches in North York

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GUEST COLUMN / BAKISH BROTHERS

CRM2: The sheriff or just another suited-up outlaw?

Montreal advisors the Bakish Brothers wonder whether CRM2 will really bring law and order to the financial industry

In 1881, after ‘cowboys’ robbed several stagecoaches in the town of Tombstone, Wyatt Earp was enlisted by his brother, Virgil, the town marshal, to help bring order to the small mining town. The result was the gunfight at the O.K. Corral.

Today, following a deep financial crisis during which many clients complained of having their ‘stagecoaches’ robbed, the Canadian Securities Administration has stepped on the scene and enlisted the help of CRM2.

CRM2 is the second stage of an industry-wide regulatory initiative requiring, among other things, greater transparency regarding fees for services provided and performance reporting on client statements. In other words, it’s an attempt to create an even playing field between representatives across the industry when clients ask two key questions: 1) “What did I make [returns]?” and 2) “What did it cost me [fees]?”

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WEALTHPROFESSIONAL.CA

industry so long to create standardized approaches to answer these questions, but regardless of the reasons, it seems the financial crisis played a large role in destabilizing the trust between the client and the financial industry as a whole, thereby acting as a catalyst to affect this change in disclosure requirements. CRM2 represents the solution to rectify this change in attitude.

But will it be successful?

DEALING WITH RETURNS Currently in the field, performance reporting is akin to a Wild West town. Competing investment representatives have free rein to report a client’s rate of return using the formula that will provide the best result, not necessarily the actual result. A rate of return can be calculated using different formulas, can suffer from time-selection bias and, more often than not, doesn’t factor in tax costs.

Therefore, it is a relatively simple task to promote one investment over another using the appropriate combination of factors and methods. In its current form, CRM2 will act like the new sheriff in town, bringing law and order to how the industry reports a rate of return to clients.

As with the Wild West, ways to circumvent the rules are likely to emerge, but the return presentation aspect of CRM2 should be an easy battle for the sheriff to win.

DEALING WITH COSTS A more difficult battle rests with CRM2’s second objective – to disclose the cost of investments to clients in an equal and fair way across the industry.

At a minimum, under CRM2, registered firms must provide an annual report on charges and other compensation that shows, in dollars, what the dealer or advisor was paid for the products and services he or she provided.

Unfortunately, at this time, the rules in this regard have not been finalized, so it’s difficult to comment on exactly how this will play out. Feebased advisors already disclose the full cost of their services to clients, as do many pooled fund invest-

ment structures, so they will be minimally affected.

Products that bundle their MER and advisory fee currently do not show the dollar value cost, so it will be interesting to see if CRM2 will be fully respected.

This is a point where CRM2 can become a wellsuited outlaw, as the true cost of an investment may ultimately remain hidden, depending on how the regulations are finalized, ultimately betraying one of the rules’ main objectives.

EXPLAINING CRM2 TO CLIENTS To keep things simple, representatives should inform their clients that returns are affected by three factors: markets, cost and client activity.

According to many studies, outperforming the market consistently is elusive, so it’s safe to assume that, as long as the client is exposed to an asset mix suitable for their risk tolerance and time horizon, returns should be similar with the new reporting requirements.

Costs, if fully reported as CRM2 intends, should become less variable across firms due to competitive forces. This leaves client activity as the key area where return rates can be improved. A good advisor, by definition, plays a pivotal role in guiding clients on their investment habits and strategies. CRM2 will ideally move the discussion away from costs and markets, and toward helping clients change their behaviors to achieve their goals, an area where an advisor can provide the most value.

As costs are disclosed, this value will need to be increasingly shown, so representatives focusing only on performance would be wise to adjust their practices accordingly.

Much like Wyatt Earp’s legacy is mixed (he’s remembered as the eminent lawman of his time, when in reality, he was much more, including a known gambler and brothel owner), it is likely that CRM2 will be full of color as it evolves during its battle over cost disclosure requirements. Sadly, those hoping for a quick resolution, à la the O.K. Corral, are in for a disappointment: The initiative is being phased in through 2017.

Joseph and Nick Bakish are award-winning financial advisors with the Investors Group in Montreal. Both have earned the prestigious Chartered Financial Analyst (CFA) designation, among others, and serve on the Financial and Estate Planning Council of Montreal.

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TEN QUESTIONS / WOLFGANG KLEIN

10 QUESTIONS FOR WOLFGANG KLEIN

Wolfgang Klein has been running a sophisticated downtown advisory practice for many years. The well-known, high-performance advisor took a few minutes out to answer our 10 questions.

1 What do you love about the industry?

We have the ability to really help people, giving us purpose and meaning in our lives. We matter, which is a nice feeling. Other loves include the ability to grow a business to limitless potential. We work for no one other than our clients.

2 What are your concerns about the industry?

I don’t really have any. The industry is constantly evolving, like a live ecosystem, through regulation, new products, technology and global competition, and as such, we must keep up with the change.

3 What kind of client do you love?

Our clients are smart, honest, real people with real lives, real needs, real wishes and real concerns. Our clients have a real trust in us that we will do what we promise, we will work hard guarding and growing their money, and we will do so honestly and ethically.

4 Is there one client who stands out in your mind?

The clients who really stand out are the ones who have been with me since my rookie days, some 14 years ago. Through thick and thin, they felt that I was always doing the best possible under the various circumstances. To those 15 or 20 dear friends, I salute you.

5 If you weren’t an advisor, what would you be doing?

I would have perhaps become a manager of some sort.

But I knew for many years that Bay Street was for me. So really there was no alternative.

6 What’s your favourite thing to do outside the office?

I love my family. I have a gorgeous, loving wife, Kathleen, and three beautiful children all under the age of 13 whom

I spend all my free time with. From hockey to skiing to time at the family cottage, my family is my life. What else is there?

7 What is one time you really went out of your way to help a client?

Thirteen years ago, an entertainment industry executive who lost their job received a package of $165,000 in the form of a LIRA and RRSP. They knew little about the world of investing, and as such, hired me to manage their nest egg. Their account today is valued at $540,000, a compounded growth rate of better than 9% – and that in a difficult decade, to say the least.

Recall that the Twin Towers fell in 2001, in 2008 we had the worst market crash since the Great Depression, and in 2011 we had a European debt crisis and an American debt debate race against the clock, followed by America losing its triple A status.

8 What keeps you going?

I have money to invest, and money never sleeps.

9 What are your own retirement plans?

I could retire now, but I am way too young to do so. Retirement is about choice of lifestyle, and I love my lifestyle. Perhaps this is the new retirement, whereby you go to work because you want to, and not out of necessity.

10 What’s the best part of the job?

There are so many great aspects to this job. The money is great. The markets are so much fun – most times, that is – to watch and participate in. I undertake a variety of tasks on a daily basis, from doing media interviews to speaking with highly intelligent analysts and strategists to lifelong learning, especially learning about new, emerging themes – say, cloud computing or health care or energy production.

I never stop learning, and I am becoming so much wiser each and every day. White hair is valued on Wall Street, which is nice to see in a young person’s world.

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

The comparison is based on a 6% annual return, an initial investment of $250,000, an average 2.01% MER for mutual funds and an average 0.22% MER for Vanguard ETFs. The MERs are asset-weighted as of December 31, 2013. Vanguard ETF MERs were sourced from the Management Reports of Fund Performance. The mutual fund industry MERs were sourced from Investor Economics. Without waivers and absorptions, the Vanguard ETF MERs would have been higher. Vanguard Investments Canada Inc. expects to continue absorbing or waiving certain fees indefinitely, but may, in its discretion, discontinue this practice at any time. For more detailed information visit, vanguardcanada.ca. Inflation and other potential costs are also not considered. Investments in the Vanguard ETFs can be made through a financial advisor or on-line brokerage account. © 2014 Vanguard Investments Canada Inc. All rights reserved.

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