Wealth Professional 4.03

NUMBERS GAME

What Canada’s largest pension plans really cost their members

ROLE MODEL

WWW.WEALTHPROFESSIONAL.CA ISSUE 4.03 | $12.95

Michael Lee-Chin on what it truly means to be a wealth manager

LOSING GROUND

Canadians’ trust in the financial industry is dropping – what can advisors do about it?

ALTERNATIVES IN THE SPOTLIGHT Alternative investments have the power to deliver generous returns – so why aren’t more investors taking advantage of them?

the Quality factor When it comes to investing, quality isn’t always obvious. Identifying high-quality opportunities takes effort and insight.

At Invesco, we’ve invested our time in developing strategies that make quality investments stand out from the crowd.

Learn why quality matters.

Visit www.invesco.ca/quality.

Commissions, management fees and expenses may all be associated with investments in exchange-traded funds (ETFs). Unless otherwise indicated, rates of return for periods greater than one year are historical annual compound total returns including changes in unit value and reinvestment of all distributions, and do not take into account any brokerage commissions or income taxes payable by any unitholder that would have reduced returns. ETFs are not guaranteed, their values change frequently and past performance may not be repeated. Please read the prospectus before investing. Copies are available from Invesco Canada Ltd. at www.powershares.ca.

Advertorial

Overlooked qualities

Investments that experience higher volatility have the potential to erode principal much more quickly than lowervolatility investments. With smaller losses in down markets, low-volatility stocks don’t have to rise as much in value in order to recover their pre-downturn value.

Not all low-volatility strategies are the same As global equity markets continue to convulse, the perils of tracking a capitalization-weighted benchmark index have been laid bare once again.

A benchmark doesn’t seek to boost an investor’s exposure to undervalued securities, nor is it able to tap into other qualities overlooked by the market, such as lower volatility. The benchmark simply follows the herd.

Many investors build their portfolios with strategies that simply track the benchmarks. But investing isn’t about achieving average results; it’s about achieving goals.

Many investors may be hoping to reduce the volatility of their portfolios, but simply holding cash could jeopardize many investment plans.

A central tenet of finance is that investors seeking to reduce risk must accept reduced returns. Yet research suggests a portfolio of less-volatile stocks tends to provide a degree of protection during broad market declines while still participating in subsequent rallies.†

Critical differences Managing volatility is critical to investment success because volatility has the potential to wear away capital quickly. When choosing a low-volatility strategy, it is important to consider the qualities that go into that strategy.

While some low-volatility indices have sector constraints that prohibit them from straying too far from their parent index, the low-volatility indices created by Standard & Poor’s (S&P) have the ability to dynamically rotate in and out of sectors as volatility dictates.

This allows S&P low-volatility indices to adjust to market conditions in a more timely fashion, focusing exclusively on volatility, without arbitrary constraints.

For example, PowerShares S&P/TSX Composite Low Volatility Index ETF (TLV) employs an unconstrained

rebalancing approach. By adhering to this methodology, TLV’s underlying portfolio began to reduce its energy weighting in September 2014 as volatility in the energy sector started to spike. By March 2015, the energy weighting in the portfolio had been completely eliminated.

An investment tracking the capweighted benchmark would have reduced its exposure to the energy sector but still held roughly 20% of assets in the struggling sector.

A constrained low-volatility strategy, bound to deviate only slightly from the benchmark, would have maintained its exposure to energy, even as the sector continued to fall through the latter half of 2015 and into 2016.

Between June 30, 2014 and January 31, 2016, volatility spiked repeatedly. In August 2015, the Chicago Board Options Exchange Volatility Index (or VIX) hit levels not seen since 2011, the last previous period of major volatility.

During this period, TLV captured only 75% of the S&P/TSX Composite Index’s volatility, outperforming the benchmark by 18.29 percentage points and demonstrating the value of a low-volatility strategy.

Cumulative return

Name PowerShares S&P/TSX Composite Low Volatility Index ETF (TLV)

June 30, 2014 to Jan. 31, 2016

7.05%

S&P/TSX Composite Index Low-volatility advantage

-11.24% +18.29%

Energy weight in low-volatility and cap-weighted indices (June 30, 2014–January 31, 2016)

Index value

Feb. 2016

Jan. 2016

Dec. 2015

Nov. 2015

Oct. 2015

Sept. 2015

Aug. 2015

July 2015

150 June 2015

0 May 2015

200

April 2015

250

5

March 2015

300

10

Feb. 2015

15

Jan. 2015

350

Dec. 2014

400

20

Nov. 2014

25

Oct. 2014

450

Sept. 2014

500

30

Aug. 2014

35

July 2014

Energy weight (%)

– Energy weight in S&P/TSX Low Volatility Index (left-side measure) – Energy weight in S&P/TSX Composite Index (left-side measure) – S&P/TSX Energy Total Return Index level (right-side measure)

Sources: Invesco and Bloomberg L.P., as at January 31, 2016. You cannot invest directly in an index.

Performance of PowerShares S&P/TSX Composite Low Volatility Index ETF (TLV), as at January 31, 2016: 1-yr, -1.73%; 3-yr, 8.42%; and since inception (April 5, 2012), 9.26%. Performance of the S&P/TSX Composite Index, as at January 31, 2016: 1-yr, -9.88%; 3-yr, 3.44%; 5-yr, 1.86%; 10-yr, 3.65%; and since inception of the ETF (April 5, 2012), 4.95%. †

Source: S&P Dow Jones Indices LLC.

S&P® is a registered trademark of Standard & Poor’s Financial Services LLC and has been licensed for use by S&P Dow Jones Indices LLC and sublicensed for certain purposes by Invesco Canada Ltd. TSX is a trademark of TSX Inc. (“TSX”) and has been licensed for use by S&P Dow Jones Indices LLC and Invesco Canada Ltd. The S&P/TSX Composite Low Volatility Index is a product of S&P Dow Jones Indices LLC, and has been licensed for use by Invesco Canada Ltd. Invesco Canada Ltd.’s PowerShares Index ETFs are not sponsored, endorsed, sold or promoted by S&P Dow Jones Indices LLC, its affiliates, LSTA, or TSX and none of such parties make any representation regarding the advisability of investing in such product.

Because the underlying index (the “Index”) is comprised of the 50 least-volatile stocks in the S&P/TSX Composite Index (the “broader index”), the Index is expected to have less volatility than the broader index from which it is drawn. However, the Index will not have the same performance as the broader index, and its performance over any given period may be better or worse than that of the broader index from which it is drawn.

Invesco is a registered business name of Invesco Canada Ltd. Invesco® and all associated trademarks are trademarks of Invesco Holding Company Limited, used under licence.

PowerShares®, Leading the Intelligent ETF Revolution® and all associated trademarks are trademarks of Invesco PowerShares Capital Management LLC (Invesco PowerShares), used under licence. Trimark®, Knowing pays® and all associated trademarks are trademarks of Invesco Canada Ltd. © Invesco Canada Ltd., 2016

ISSUE 4.03

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

CONTENTS

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UPFRONT 04 Editorial

What’s behind the ORPP delay?

06 Statistics

Comparing the true costs of the country’s largest pension plans

08 Head to head PEOPLE

INDUSTRY ICON Michael Lee-Chin shares his winning formula for creating wealth

42

Should Canada keep commissions or move to a flat-fee model?

09 Opinion

How emotions can sabotage good investment decisions

10 News analysis

Why are Canadians losing faith in the financial industry?

12 Intelligence

This month’s big movers and shakers

14 ETF update

The appeal of niche ETFs

16 Alternative investment update

COVER STORY

THE ADVISOR’S ALTERNATIVE

From mutual funds to whisky, an insider’s look at the next big things in alternative investments – and advice for adding them to clients’ portfolios PEOPLE

ADVISOR PROFILE

It took a horrific accident to set Dian Chaaban’s life on the right path

36

2015’s best-performing hedge funds FEATURES

CORPORATE RETREATS

Investing in a getaway for your leadership team could pay dividends – if you plan it correctly

44

34 ETF portfolio construction

Helping a couple save for retirement while putting their kids through university

PEOPLE 39 Career path

Ed Clark’s rise from TD Bank to advising Ontario’s premier

40 Other life

Michael Connon rocks out

FEATURES

MONOTASKING

If you’re still placing a high priority on multitasking, you’re doing your productivity a major disservice

2 www.wealthprofessional.ca

FEATURES

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UPFRONT

EDITORIAL

Pensions and politics

W

e can’t play politics with people’s pensions.”

Those were the words of Mitzie Hunter, Ontario’s associate minister of finance, in a Q&A with Maclean’s in August of last year.

Yet after the provincial government announced it was delaying the implementation of the Ontario Retirement Pension Plan [ORPP], it seems that’s exactly what it’s doing.

During a February speech at the Empire Club, Finance Minister Charles Sousa announced the province would be delaying the ORPP by a year. Now large corporations won’t have to start remitting premiums until January 1, 2018, although they will still have to register with the ORPP as of January 1, 2017. The original schedule called for premiums to apply to large companies as of 2017 while the ORPP continued to roll out in stages until January 1, 2020.

The government gambled and lost on a political tool that, if implemented properly and effectively, could have a tremendous impact Perhaps the province is hoping to put pressure on the federal government to revamp the CPP. Indeed, the provincial government’s long-stated position is that it would prefer CPP expansion to the ORPP. There have also been rumblings that the province is delaying in hopes that other provinces will create their own plans similar to the ORPP. But with neither situation coming to fruition, it appears the province is acquiescing to the tremendous backlash from the financial services industry, as well as numerous other interest groups.

It seems there was very little consultation with the industry on the details of the plan – what to include, how to phase it in or how it would impact employers in the province. Even if the ORPP was a legitimate attempt to help Ontarians, it seems like it’s been a poorly conceived rush job that didn’t take into account all of the necessary factors.

That’s not to say a retirement plan is without merit. Indeed, the idea of helping people save for retirement should be applauded. But in this case, the government gambled and lost on a political tool that, if implemented properly and effectively, could have a tremendous impact.

wealthprofessional.ca ISSUE 4.03 EDITORIAL Editor Nicolas Heffernan Writers Paul Lucas Donald Horne Kayla Haigh Executive Editor – Special Features Ryan Smith Copy Editor Clare Alexander

CONTRIBUTORS Nick Armet Jenny Brockis Nikki Fogden-Moore

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UPFRONT

STATISTICS

The cost of a pension

COMPARING PLAN EXPENSES When looking at the relationship between a pension plan’s size and its cost (measured as a percentage of assets), the Fraser Institute found no direct correlation. While the CPP, the largest plan in the study, came in with the highest expense ratio, the OTPP, which was the next-largest plan studied, fell in the middle in terms of expenses.

How does the Canada Pension Plan stack up against other large pension plans?

PROPONENTS OF the CPP often argue that it has low costs and economies of scale – in other words, the cost-to-asset ratio declines as the value of its AUM grows. But is that really true?

The Fraser Institute recently examined that claim, comparing the CPP’s investment and administrative costs with five other large public pension plans: the Ontario Teachers’ Pension Plan [OTPP], the Ontario Municipal Employees Retirement System [OMERS], the Healthcare of Ontario Pension Plan [HOOPP], the Ontario

35% $714 billion

Approximate percentage of retirement assets managed by Canada’s top 10 pension plans

Total amount managed by Canada’s 10 largest pension plans, as of 2011

Pension Board [OPB] and the OPTrust.

The study found no relationship between the size of a pension plan’s assets and its cost.

What’s more, researchers discovered that large public pension plans might actually have diseconomies of scale because of the complexity of implementing their investment strategies, which includes contracting external experts – a practice that has become increasingly popular as plans invest in nontraditional assets such as real estate, infrastructure and private equity.

100%

Growth in net assets of Canada’s top 10 pension plans between 2003 and 2011

CANADA PENSION PLAN Members: 13.5 million Assets: $269 billion

$400 billion Amount the 10 largest pension plans have invested in the Canadian economy

Source: Boston Consulting Group

COSTS PER MEMBER

RISING COSTS ACROSS THE BOARD

When examining the expenses per member for each plan, economies of scale do appear to be present – with more than 13 million members, the CPP spent a fraction of what the other plans did per member.

Since 2009, total expenses as a share of assets have slowly climbed for almost every plan, with the notable exception of the HOOPP. This is partly due to inflation in the wake of the financial crisis, says the Fraser Institute, but also reflects greater external expenses. % CPP OTPP OMERS HOOPP OPB OPTrust 1.5

$ 350 1.2

300 250

0.9

200

$304

150 100

$146 $152

50 0

$202

$270 0.6

$30 CPP

OTPP OMERS HOOPP OPB OPTrust Source: Fraser Institute

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0.3

2009

2010

2011

2012

2013

2014 Source: Fraser Institute

OPTRUST

1.2

ONTARIO MUNICIPAL EMPLOYEES RETIREMENT SYSTEM

Members: 76,000 Assets: $17 billion

Members: 410,000

ONTARIO TEACHERS’ PENSION PLAN

Assets: $72 billion

Members: 311,000

1.0

Assets: $154 billion

0.8 ONTARIO PENSION BOARD

0.6

Members: 78,000 Assets: $22 billion

1.07% 1.02%

0.4

0.68% 0.63%

0.2

0.48%

HEALTHCARE OF ONTARIO PENSION PLAN

0.34%

Members: 269,000 Assets: $61 billion

0.0 Percentage of assets devoted to expenses

Source: Fraser Institute

WHERE’S THE MONEY GOING? Pension plan expenses tend to fall into three categories: administrative costs (such as collecting contributions and issuing cheques), internal investments (planning or executing the investment strategy) and external investments (advice and transaction fees). Of these, the latter seems to be driving the most cost increases.

Pension administration

% 0.6

Internal investments

External investments

0.5

INTERNAL OR EXTERNAL MANAGEMENT? Although external investment costs are growing, the Fraser Institute found no direct link between the amount of investments a plan outsources and its total costs.

For example, the OMERS manages most of its own investments, yet had the third-highest overall costs.

CPP

35% 65%

OPTrust

40% OMERS 60%

OTPP

60% 40%

0.4 0.3 0.2 0.1 0.0

.32 .25 .51 CPP

.04 .25 .34 OTPP

.10 .48 .10 OMERS

.11 .23 0 HOOPP

.13 .07 .30 OPB

.14 .42 .47 OPTrust Source: Fraser Institute

HOOPP

100%

9% 91%

Internal External Source: Fraser Institute

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UPFRONT

HEAD TO HEAD

Should commission-based compensation stay?

Now that the UK is considering a return to commissions for financial advisors, will that end debate over a ban in Canada?

Jason McIntyre

Allan Johnson

Robert Roby

Head of distribution Vanguard

Financial advisor Allan L. Johnson Financial Group

Senior wealth advisor The Roby Retirement and Wealth Team

“A value proposition based on performance alone puts an advisor at a disadvantage. Not only does success depend on factors outside the advisor’s control, such as the returns from individual securities or professionally managed funds, but the strategy also can promote a horse-race mentality among clients, leading them to depart if the promised outperformance does not materialize.

On the other hand, fee-based guidance changes the conversation, creating an incentive for advisors to demonstrate how they add value beyond performance.

Because compensation is more transparent, advisors can show how they add value.”

“A 1% trailer or 1% fee on a $50,000 account is only $500 for the year. Most everyone has to split this with their dealer.

We must send four quarterly statements per year. We provide everyone 24/7 web access to their accounts.

We provide everyone with a monthly newsletter. We have a staff of five. Nobody asked us what the costs are to provide the levels of service we offer.

If the focus is only on making money, like they seem to suggest, then the prudent thing to do will be to fire 60% of my clients. Many of my friends and their families just don’t have a minimum of $250,000 to invest. Who is supposed to provide these folks with advice?”

“Moving to a brokerage account to save commissions is typical of the mentality of the powers that be. They fail to understand the value of utilizing a professional, [even though it’s been] proven that after fees, investors with professional advisors have substantially more assets than those who don’t.

The focus on fees is very prejudicial to advisors and to investors who fail to see any value. It’s been proven in Britain and Australia. If an advisor can keep the emotion out of his/her decision-making, that would be a marvel.

It’s this kind of mentality that is hurting the general investing public rather than helping them.”

THE UK’S COMMISSION STANCE The UK’s Retail Distribution Review [RDR], which was implemented in January 2013, eliminated third-party commissions for advisors in favour of a flat upfront fee. Three years later, statistics show that the ban has thinned the ranks of UK advisors by about 20%, leading to speculation that it could eventually be lifted. “We do not want to go back to a world where we had the problems of the pre-RDR,” Tracey McDermott, acting CEO of the Financial Conduct Authority, told the BBC. “What we do want to look at is actually what is the best way of delivering advice and guidance across the market, so I wouldn’t rule out that there may be some element of commission.”

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UPFRONT

OPINION

GOT AN OPINION THAT COUNTS? E-mail wealthprofessional@kmimedia.ca

Volatility and investor psychology When investing in a volatile market, ignoring your emotions is a winning strategy, writes Nick Armet OVER TIME, economic conditions always wax and wane, moving from better to worse and back again. Yet investor psychology typically responds to these ups and downs in a highly exaggerated way.

In the real world, there are checks and balances. Irrespective of whether global growth is slowing or accelerating, economic life goes on. People will still eat, use banks, pay their rent, make phone calls and buy petrol.

And while the sales of cars, beer, houses and mobile phones will fluctuate, there are limitations as to how good or bad things can get.

However, there are no checks and balances on the swings in investor psychology. When things are going well, investors assume they will just keep getting better, and market psychology gravitates toward euphoria. On the other hand, when things seem to be getting worse, everything is viewed negatively, and market psychology swings toward anxiety and panic.

A deterioration in one part of the world can have a negative effect on stocks that sets off reactions elsewhere. We then see a chain reaction of negative movements feeding off each other, invariably reinforced by doom-andgloom explanations in the financial media. But media coverage never seems to acknowledge what some real-time surveys of market crashes do highlight – that some investors were selling simply because prices were dropping.

So what accounts for the emotional bias in decision-making? The theory is that we have

two cognitive systems. System 1 is automatic – it responds to the environment as quickly as possible, especially in times of perceived danger. It is the older part of our brain, in evolutionary terms, and it controls the ‘fight or flight’ response. System 2 is engaged for challenging problems where calculation and deliberation are required. It is the more recent part of our brain, in evolutionary terms.

The problem is that we tend to revert to the

ology tend to overreact in both directions, meaning share prices become detached from intrinsic, ‘fair’ values. A high-quality asset can become expensive and a poor short-term investment, while even a low-quality asset can become cheap and a good investment.

Since market participants effectively set asset prices, it is their behaviour that ultimately ends up creating much of the risk in investing.

This disconnect between real-world fundamentals and investors’ unbounded emotions is a critical one. It can be used to the advantage of the contrarian investor who is prepared to go against the herd by taking a more patient view. Buying when others are fearful not only requires a longer-term view, it also means investing against your emotions. In practice, the evidence suggests that relatively few people really have the stomach for this. Instead, the solution for many will be to invest in a diversified, multi-asset portfolio and leave it alone.

Similarly, regular saving throughout the investment cycle, including during periods of volatility – known as cost averaging – is a tried-and-tested way of taking advantage of lower prices. Both strategies effectively remove the need for decision-making in volatile times and therefore avoid the possibility of emotionally biased decisions.

“Buying when others are fearful not only requires a longer-term view, it also means investing against your emotions” automatic, emotionally influenced System 1 during times of stress and uncertainty, rather than have to deal with the larger cognitive processing load on our deliberative System 2.

There are two principal behavioural biases that kick in during times of market stress: herding, or the urge to do as others are doing, and loss aversion, a deep-seated human desire to avoid losses (financial or emotional).

During uncertain times, when markets are going down and everyone appears to be selling, these two biases can work in combination to produce a pronounced emotional effect on many investors.

It is important to remember, however, that everything has a fair price. Swings in psych-

While investor psychology can cause short-term overreactions, it is worth remembering that over longer timeframes, stock prices are ultimately driven by fundamentals like corporate earnings, not investor sentiment. This is why investors should not let occasional volatility derail their longterm investment plans. In times like these, investors should remind themselves that behavioural biases are at play so as not to make an enemy of themselves.

Nick Armet is an investment commentator for Fidelity International.

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9

UPFRONT

NEWS ANALYSIS

Where is the trust?

Canadians’ trust in the financial services industry is dropping, but there are still reasons for optimism AS RETAIL investors’ trust in the financial services industry in Canada plummets, the opposite is happening in the US, UK and Australia.

A new survey from the CFA Institute found that since 2013, trust among Canadian investors has fallen 12%, while investor trust in the US, UK and Australia has increased during the same period. Yet despite sliding from 76% to 64%, Canada’s overall trust level is still higher than the levels in those markets.

“It’s still high relative to all those other countries we’ve talked about, so we still benefit from that trust,” says Elizabeth Hamilton-Keen, director of investment counselling at Mawer and chair of the CFA

allegations about some of the companies that are paramount on our Canadian markets and exchanges – whether it be infrastructure companies in Quebec or manufacturing companies,” Hamilton-Keen says. “All of that is kind of adding to this question, and turmoil may have impacted investor trust.”

Regulations certainly have had an effect as well – both positive and negative. HamiltonKeen says the complexity of Canada’s regulatory system, in which retail investments are largely regulated by the IIROC, while private investors fall under the scrutiny of provincial securities commissions, could be a factor in consumers’ confusion.

“We’re a bit more disorganized from

“There’s a bunch of confusion that is contributing to that drop in trust.

But I would say market activity is the number-one cause” Elizabeth Hamilton-Keen, Mawer/CFA Institute Institute. “There’s a bunch of confusion that is contributing to that drop in trust. But I would say market activity is the number-one cause. Our market in Canada has been a little bit more volatile than some of these other markets this last little while.”

Another issue affecting trust has been the news surrounding Canadian firms.

“We’ve certainly seen a lot more noise and

10

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the regulatory side,” she says. “I sense that might be contributing to the confusion.”

However, she highlights the increase in trust in the US, UK and Australia, all of which have undergone regulation reform in recent years, as an indication that regulations could be helping to foster more trust.

She points to the UK as an example.

“If we look at the UK, they went through

significant regulatory reforms,” HamiltonKeen says. “It was very disruptive, but it seems to me it might have been working, that it is helping UK investors. In the UK, those who are truly investment management professionals have stayed in the industry.”

So will CRM2 bring similar changes to Canada?

“I think that’s the intention,” HamiltonKeen says. “Disruption comes first, and I think we’ll still see more disruption from the CRM2 side before there is that reassurance and clarity that impacts investors. But overall, I think it’s the right direction to get that transparency in the hands of investors so it’s not as opaque and complex.”

The findings from the CFA Institute survey also reveal that investors want regular, clear communications about fees

FAST FACTS FROM THE CFA SURVEY

and upfront conversations about conflicts of interest, further supporting the underlying aim of CRM2.

“Performance is no longer the only

and with the rise of robo-advisors, they have more alternatives than ever before. If investment professionals don’t provide this clarity, then regulators may force them to,

“Performance is no longer the only ‘deal-breaker’ for investors. They are continuing to demand more clarity and service from financial professionals” Paul Smith, CFA Institute ‘deal-breaker’ for investors,” says Paul Smith, CEO of the CFA Institute. “They are continuing to demand more clarity and service from financial professionals,

for better or worse.”

The CFA Institute found that the biggest gaps between investors’ expectations and what they receive relate to fees and

81%

81% of Canadian investors still prefer being advised by a person rather than using the latest roboadvisor technology

80%

80% of Canadian retail investors rate ethical standards as the most important attribute of an investment firm

69%

69% of global investors rated it as the most important attribute in an investment firm

50%

50% of Canadian retail investors are likely to recommend the investment firm they work with to others

25%

25% of Canadian investors feel that another financial crisis is likely within the next three years, and about half of investors lack confidence in their firm’s ability to manage through a crisis

performance. Clients want fees that are clearly explained and fairly reflect the value they are getting from their financial advisor.

“The bar for investment management professionals has never been higher,” Smith says. “Building trust requires truly demonstrating your commitment to clients’ well-being, not empty performance promises or tick-the-box compliance exercises.

Effectively doing so will help advance the investment management profession at a time when the public questions its worth and relevance.”

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UPFRONT

INTELLIGENCE CORPORATE ACQUIRER

TARGET

PRODUCTS COMMENTS

Aviva

RBC General Insurance Company

The UK’s second biggest insurer has agreed to pay $582 million for the home and auto insurance arm of RBC

Group Marcelle

Lise Watier

The acquisition includes an $18 million investment by pension fund Caisse de dépôt et placement du Québec

Lowe’s

Rona

The home improvement chain has acquired the Canadian company for $3.2 billion as it looks to expand across the country

Nasdaq

Chi-X Canada

The deal allows the New York-based company to expand the market for Canadian equities, ETP listings and derivative tradings

Nasdaq

MarketWired

The stock exchange operator also has purchased the Torontobased investor relations and newswire service

Scotiabank

Citigroup operations in Panama and Costa Rica

The acquisition, valued at US$360 million, includes four service centres, 88 ATMs and 21 bank branches

Tahoe Resources

Lake Shore Gold Corp.

Nevada-based Tahoe Resources paid $945 million to acquire the Toronto-based mining company

Arrow Capital looks to convert mutual funds

Toronto firm Arrow Capital will host a series of meetings in March in an effort to approve a restructuring of some of its funds. The firm is looking to make changes to its Raven Rock Strategy Income Fund and RRF Trust to convert them into open-ended mutual funds. To achieve this, Arrow Capital plans to delist units of the Raven Rock fund from the Toronto Stock Exchange and terminate the fund. After the settlement of the fund’s liabilities, unitholders will receive a proportionate share of RRF Trust units. If approved, the trust will be renamed the Exemplar US High Yield Fund.

IA Clarington launches three new funds

Scotiabank aims for overseas success

Scotiabank has set its sights on developing across Panama and Costa Rica after closing a deal with Citigroup. The acquisition sees the Canadian bank take hold of the New York giant’s commercial banking and retail business in the two countries. Valued at around $360 million, the deal will broaden Scotiabank’s customer base from around 137,000 up to 387,000. In total, Scotiabank gains four service centres, 88 ATMs and 21 bank branches. In addition, the company’s market share in the credit card sector will leap to 18% across Panama and 15% throughout Costa Rica.

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Toronto-based IA Clarington has launched three new mutual funds. The IA Clarington Yield Opportunities Fund is designed to offer a steady income stream and modest returns based on a mix of high-yield fixed-income securities. The IA Clarington US Dividend Growth Registered Fund seeks to provide long-term capital appreciation via a diverse portfolio of US large-cap equities. Finally, the IA Clarington US Dollar Floating Rate Income Fund focuses on floatingrate loans and securities, as well as debt obligations of investment-grade and non-investment-grade North American and global corporate issuers.

PEOPLE Purpose Investments adds two funds Targeting investors in search of a regular income, Purpose Investments has announced the launch of a money market fund and a US dollar ETF. The Purpose Premium Money Market Fund aims to maximize monthly incomes with investments that focus on highinterest deposit accounts and highquality money market securities with maturity terms of less than one year.

The Purpose US Cash ETF, meanwhile, also focuses on high-interest deposit accounts and high-quality money market securities, but ones that are denominated in US dollars.

RBC introduces four new ETFs

Royal Bank of Canada’s global asset management division recently introduced four new exchange-traded funds. Three of the ETFs are designed to offer international equities exposure, while the fourth, the RBC 1-5 Year Laddered Canadian Bond ETF, is meant to grant exposure to Canadian investment-grade corporate and government bonds. “This launch extends our successful suite of RBC Quant Dividend Leaders and RBC Quant Equity Leaders ETFs, which feature a disciplined investment process and competitive fees,” said Mark Neill, head of RBC ETFs.

Excel reveals new Indiafocused funds

The world’s second most populous country is the focus of two new funds from Torontobased Excel Funds Management – the company has launched two mutual funds that will target the Indian market. The first is the India Balanced Fund, which will focus on investments in a diversified, actively managed portfolio of investment-grade fixed-income securities issued in India. The second is the Excel New India Leaders Fund. It focuses on investments in companies that are considered to be emerging industry leaders across 700 equity securities.

NAME

LEAVING

JOINING

NEW POSITION

Iqbal Bhinder

United Surety

Camden Underwriting Agencies

Business development manager

Remco van Eeuwijk

MN

Alberta Investment Management Corp.

Chief risk officer

Nick Gubbay

Mercer Investments

Eckler

Senior consultant in group benefits practice

Ela Karahasanoglu

Mercer Investments

CIBC Asset Management

Vice president, currency and asset allocation

Dinesh Kumar

TC Media

InsuranceFor Children.ca

Vice president of marketing and distribution

Bjarne Graven Larsen

Novo A/S

Ontario Teachers’ Pension Plan

Executive vice president and chief investment officer

Doug Macdonald

Aviva Investors Canada

CIBC Asset Management

Managing director and head of institutional asset management

Henry Toby

Cove Capital

Arthur J. Gallagher

Senior vice president of group benefits and retirement

Bhinder moves to underwriting Iqbal Bhinder has changed his role within the Fenchurch General Insurance Company, moving from United Surety, the group’s largest surety partner, into the position of business development manager at Camden Underwriting Agencies. Bhinder previously held management and executive positions at Kingsway General Insurance and Berkley Canada.

“Iqbal brings with him an underwriting background of 14 years, along with strong broker relationships, which will help us grow volume within the department,” said Scott Knight, chief operating officer for Fenchurch General Insurance.

Kumar welcomes Child Plan role After serving as a national sales director for the financial newspapers Investment Executive and Finance et Investissement, Dinesh Kumar relishes the opportunity to work with a financial innovator at InsuranceForChildren.ca.

“Child Plan from InsuranceForChildren.ca is the fastestgrowing alternative to RESP in the past 20 years and the only investment parents and grandparents can open for their children and grandchildren in Canada,” he said. “RESP only received $4 billion in deposits in 2014, which means parents with over $3 billion to invest are looking for an alternative, flexible education investment that won’t limit their children’s options in the future.”

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UPFRONT

ETF UPDATE NEWS BRIEFS Increased ETF flows lead to gold bounceback Gold has enjoyed a 15% surge so far in 2016 and is one of the top-performing commodities of the year, largely due to flows from ETFs. Investors have purchased larger quantities of gold via ETFs throughout the year to date than they sold for the whole of 2015.

It appears the precious metal is being viewed as a safe haven during this period of market volatility as many central banks produce negative interest rates. There is a word of caution, however – analysts suggest that gains could be limited unless there is physical demand in China and India.

Is Wall Street the next frontier for ETFs? Goldman Sachs has filed a prospectus for the Goldman Sachs Hedge Fund VIP ETF, a new ETF that will be based on the investment bank’s Hedge Fund Trend Monitor. As Goldman’s report does, the fund will track the 50 companies that appear most in the 13F filings of fundamentally driven hedge funds. This marks the first time a Wall Street bank has used its own report as an ETF basis. Should the ETF gather pace in the market, analysts are predicting that it could be the start of a significant trend among Wall Street banks.

Smart beta could impair performance High trading costs could impair the performance of smart-beta ETFs, according to a new study from Morningstar. According to the research, the smart-beta market now stands at $478 billion and includes around 950 products. Nevertheless,

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Morningstar’s data suggests that the alternative benchmarks being tracked by these funds, including dividend and momentum yield, can lead to high transaction expenses, hampering the returns for investors. The firm believes that strategies with smart beta usually have to be re-weighted more regularly than traditional ETFs, leading to replication costs that again heighten overall transaction expenses.

Cambria launches highyield ETF Cambria Investment Management has announced the launch of the Cambria Sovereign High Yield Bond [SOVB] ETF, the seventh fund in its ETF suite and its first in the fixed-income sector.

The Los Angeles-based company reports that the SOVB will buy and hold foreign government bonds with attractive values and the potential for high yields. Whereas many bond funds focus on large debtors, SOVB will hold a portfolio of liquid sovereign debt with no one exposure surpassing 10%. The fund will offer potential access to bonds across 44 countries while paying income every quarter.

Promising emerging market for funds ETFs may be ready for lift-off in one emerging market: India. That’s the verdict of S&P Dow Jones Indices (SPDJI), which is considered a global leader in terms of providing benchmark indices for the financial markets. It predicts that ETFs will enjoy particular success in the Indian market during the next five years.

According to Alka Banerjee, managing director of product management at SPDJI, ETFs in India are set to grow significantly, and “the trajectory is only up.”

Boom in niche ETFs An ETF strategist weighs in about the pros and cons of nontraditional ETFs Passive investors are enjoying unprecedented power to make tactical plays thanks to the rise and rise of niche ETFs. With the potential to outperform their traditional alternatives, albeit with higher risk, these niche products give investors the chance to tilt for tax efficiency, interest rate protection or increased income.

“We use ETFs across all of our models, but specifically in our fixed-income model to target certain credit categories,” says Brent Vandermeer, portfolio manager and executive director at Vandermeer Wealth Management. “In a way, we’re tilting away from the broad index and designing a portfolio with an opinion on rates, currency, credit quality, etc. ETFs allow us to do that in a targeted way without picking a few individual bonds.”

That’s not the end to their advantages, according to Vandermeer.

“You can get the exact exposure you want, and you can therefore design a very specific portfolio,” he says. “Liquidity is good on ETFs as long as the underlying exposure is liquid as well. We take the problem of reduced availability and liquidity with most bond desks out of the equation. We lower costs when compared to most actively managed mutual funds.”

However, they do have a downside: liquidity and trading risks can sometimes become problems with the more niche ETFs. “If the sector one is trying to target has liquidity issues already, the bid-ask spread of the ETF will be quite wide and will result in inefficient pricing and cost drag,”

Vandermeer says. “One has to be very aware of the trading characteristics of the underlying holdings, and they can’t just blindly buy a niche sector ETF without considering this issue.”

So what strategies are the most effective for ETF investors?

“Generally, investors should look to build a comprehensive, globally diverse core portfolio out of ETFs and then add satellite positions around that core (actively

“You can get the exact exposure you want, and you can therefore design a very specific portfolio” managed funds, niche ETFs, shares or alternatives) to add alpha,” Vandermeer says. “Then, work with a portfolio manager who rebalances and monitors the portfolio constantly so that they can rest assured that they’re best served riding out the market fluctuations and staying invested over the long run.

“The passive or smart-beta ETF strategy can take away the emotional drama of wondering if the active manager ‘still has the magic touch,’” he continues, “and can therefore improve the behavioural risks to maintaining a portfolio strategy over the long run. That’s key. So costs are lower, transparency is higher, and the likelihood of sticking to the plan is much greater.”

Q&A

Sean Harrell

ETFs and volatility

Partner and senior advisor HOWE HARRELL & ASSOCIATES

Years in the industry 16 Career highlight Opening his own independent firm in 2006

What effect has the recent market volatility had on your business?

The volatility over the past few years has kept us very busy. We like market volatility from a business perspective, as it presents us with a lot of opportunities. People are typically not enthused with the performance of their portfolios and are looking for second opinions.

This opens the door for us to earn their business.

How do you deal with nervous clients?

We educate them on how markets work. We flat-out tell people that it is normal to lose money in the market some years. There are good times and bad times in markets. The performance of your portfolio has just as much to do with how you react to these fluctuations as what investments you own. People tend to forget this and tend to want to sell when things are bad and buy when things are good. It’s human nature, and it’s a sure way to lose money in the markets.

Have you had an experience when a client was particularly worried?

We have one very nervous client on our books. We have him invested a touch below his risk tolerance to try to smooth out his returns.

Every time we meet, we really don’t discuss the performance of the portfolio as much as we discuss sticking to our plan and not making any rash decisions. He knows what he should be doing 100% of the time, but his nature is to run as soon as his account loses some money. I try to protect him from himself.

How effective are ETFs during market volatility?

ETFs typically follow a specific exchange or sector. There’s not a lot of protection from volatility. If you are looking to mimic the S&P 500 or crude oil, for example, an ETF would cost-effectively do the trick.

But you are basically signing up to follow the ups and downs of the market or sector you have bought.

What are the main things advisors should keep in mind when using ETFs during these periods?

Remember that they follow the markets very closely, if not perfectly.

I have rarely seen ETFs constitute an entire portfolio. Usually they are complemented with specific stocks or funds to round out the portfolio. Some would say a good actively managed fund should outperform an ETF in all market conditions; some people will say otherwise. To me, it depends on what the individual investor is looking for. Know what your client needs: An ETF may be a good core holding for their portfolio, rounded out by some other individual holdings.

Do you any some specific strategies for investments during these volatile times?

Stick to your goals, follow a plan, and don’t do anything rash. We use the fluctuations as opportunities to take profits from one area of a portfolio and reallocate to an area that has lost money.

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UPFRONT

ALTERNATIVE INVESTMENT UPDATE

Hedge fund winners and losers A new report identifies the best-performing hedge funds of the past year

Master Fund (27%) and the Teton Capital Partners Fund (23.5%). In the $250 million to $1 billion range, the best-performing funds were the Ping Exceptional Value Fund (39.2% return), the SPQ Asia Opportunities Fund (31.8%), the APS Asia-Pacific Long/Short (Cayman) Fund (29.9%), the Lansdowne European Equity Fund (27.2%) and the TT Long/Short Focus Fund (26.8%).

“Asian hedge funds generally outperformed competitors across North America and Europe”

THERE’S NO question that 2015 was a challenging year for global markets, and hedge funds didn’t escape entirely unscathed. According to data from Hedge Fund Research, hedge funds attracted a net $44 billion in global assets during the year, representing the lowest levels since 2012.

The number is reflective of a series of unexpected economic events that took their toll on the market. In many cases, performance was further hit by crowded or even concentrated trades, as well as ill-timed bets about the prospect that oil and energy prices

NEWS BRIEFS

would continue to slip.

Nevertheless, plenty of hedge funds were able to post impressive returns. Bloomberg recently identified the best-performing hedge funds in two categories: those with more than $1 billion in assets, and those that have between $250 million and $1 billion in assets.

In the first category, the top performers were the Perceptive Life Sciences Fund (51.8% return), the Melvin Capital Fund (47%), the Segantii Asia-Pacific Equity Multi Strategy Fund (29.6%), the Sylebra Capital Partners

Tough year ahead for real estate

The Canadian real estate industry is likely to face a tough year, according to Paul Morassutti, executive vice president at CBRE Ltd. Speaking at the RealCapital Real Estate Conference, Morassutti suggested that a combination of skittish investors, low oil prices and a high level of supply within the retail and office sector could mean that commercial space demand will slip. He described “demand, or lack thereof” as the most significant story in the office sector this year – office vacancies are currently rising in every market across the country.

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So what are these funds doing right?

Bloomberg found that some managers were able to time their buys well, while others were able to file through illiquid securities and small caps in order to find opportunities.

Many long-term holdings also paid off; in the case of funds that performed poorly, some were suitably hedged or diversified so their investors were well-protected.

The results also indicate that Asian hedge funds generally outperformed competitors across North America and Europe, even during the most volatile 12 months for equities in China in a decade. It was also a stock picker’s year – more than half of the top 50 funds were within equity markets.

In addition, multi-manager firms featured heavily in the results, which, according to Bloomberg, could lead to more hiring at such firms during 2016.

Venture capital at 10-year high

A tech boom has helped pull Canadian venture capital investing to its highest levels in 10 years.

Figures from the Canadian Venture Capital & Private Equity Association [CVCA] show that during 2015, funding for entrepreneurs totalled $2.25 billion across 536 deals, representing the best achievement for startups in Canada since the financial crisis in 2008. CVCA president Mike Woollatt predicts the trend will continue in the year ahead, as venture investors in the country managed to raise a further $2 billion last year and are now searching for new possibilities.

Q&A

Declan Winston Ramsaran

Return of capital, not return on capital

Managing director PANGEA PRIVATE FAMILY OFFICES

Years in the industry 15+ Wake-up call “I realized, after 12 years as an employee with a major financial institution, that bank marketing material is generally aspirational, and a majority of clients experience only a fraction of the value proposition’s intention – all while paying for 100% of the promise”

What is your alternative investment process?

We access three broad categories of investments: traditional investments, alternative investments and passion investments. In terms of private equity, hedge funds and real estate, we have an alternative investment filter, which is divided into five stages and shaped like a funnel, from the wide opening at the top to the narrow opening at the bottom.

Most other wealth management models place the product first, at the centre of their process. In our family office, stages one through three are reserved for the family, placing them at the centre of the process.

What events do you expect to see in the alternative sector in the coming year?

Alternative investments are a huge growth area. Despite a challenging year for global financial markets and for hedge funds, investors remain committed to their hedge fund programs, with 41% planning to increase their hedge fund allocations in 2016, according to Deutsche Bank’s Alternative Investment Survey. Hedge funds designed to capture gains in volatile markets with the use of leverage and short-selling may produce high-water marks by the close of 2016.

Elsewhere in the alternative landscape, I expect significant flows of capital into real estate. A recent Knight Frank survey showed that about 72% of property developers, fund and real estate investment trust [REIT] managers and lenders intend to invest in commercial properties in 2016.

Dream Office enjoys dream yield

The largest publicly traded pure-play office real estate company in Canada is enjoying some eye-catching dividends. Dream Office Real Estate Investment Trust was featured on The Motley Fool in February for a 14.7% dividend. This made it the most generous within its sector, as well as one of the highest across Canada. Results for the first nine months of 2015 saw Dream Office’s adjusted funds from operations reach $1.88 per unit, placing the company on track to earn $2.50 per share for the full year.

Which developments will have the biggest impact on your own portfolio?

In 2016, we’ve committed to paying closer attention to socially responsible investments. As our process regularly scans the tax and economic landscape, regulatory changes will have a marginal impact on our client portfolios. However, with emerging alternative options in the socially responsible investing space, we are increasingly evaluating opportunities for capital deployment in these types of investments.

What is your attitude toward risk in the current environment?

We have prepared for the challenging financial environment by adopting a defensive posture while maintaining an opportunistic eye. This year we are primarily focused on return of capital more so than return on capital.

Are there any unusual alternative investments that you think are being overlooked generally by the market?

I think the concept of alternatives is slowly permeating the minds of mass-market investors. From what I’ve seen, most quality alternative investments make it across the desks of those with capital. However, if we’re talking about one area that is generally being bypassed, I would say that there is one part of the world with considerable opportunity that is widely overlooked: Africa. Yes, Africa!

It’s definitely one to watch going forward.

IAM becomes UN signatory

Integrated Asset Management Corporation [IAM] has become a signatory to the UN-supported Principles for Responsible Investment initiative. The international network of investors is working to understand the implications of sustainability for investors, and supports signatories in incorporating responsible investing issues into their decision-making and ownership practices. The initiative was launched in 2006 and has helped raised awareness about responsible investments worldwide.

No respite for Asian hedge funds

Following a significant market sell-off during January, it appears there is no respite for hedge funds in Asia as 2016 marches on. The $241 million Orchid China Master Fund had lost another 2.6% as of February 15, following its 11.2% slip in January. Meanwhile, the $33 million Truston Falcon Asia Fund reduced its unhedged positions in reaction to extreme volatility and an uncertain outlook. Open Door Capital Group, which saw a 23% loss in January, commented that the slow growth in China “cannot provide any positive support for the capital market.”

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PEOPLE

INDUSTRY ICON

FORMULA FOR SUCCESS A degree in engineering gave Michael Lee-Chin the foundation to develop a wealth creation formula and a framework that made him one of the most successful businessmen in Canada IT WAS a warm spring day in May 1976, and Michael Lee-Chin was terrified.

It was the day before he began working as a financial advisor, and after finishing training the week before, he was expected to go to work with a list of prospects.

“I had no prospects,” he says. “On the Sunday, my blood pressure was 190 over 110.

It was just off the Richter scale.”

He was waiting at the airport to pick up his mom, who was visiting from Miami. Her flight was delayed two hours, and Lee-Chin was frantically trying to think of ways to find people to see.

He decided to take a drive around the neighbourhood near the airport, where he saw people out tending their gardens.

“I thought, ‘Mike, there they are. Those are your prospects. The next person you see, close your eyes, put your foot on the brake, put the car in park, jump out of the car, and you’re in front of a real live prospect.’ That’s what I did.

I was nervous as hell.”

He made six approaches that day and got five appointments. In his first month in the business he made $10,000 – a far cry from the $2.50 an hour he was earning as a bouncer at McMaster’s student pub.

Nearly 40 years to the day later, Michael Lee-Chin is a billionaire and renowned in

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Canada. Over the years, he has acquired and sold AIC Limited’s mutual fund business to Manulife Asset Management and the Berkshire group of companies to Manulife Financial. He is now the executive chairman, CEO and portfolio manager at Portland Investment Counsel.

out on a quest at age 26 to figure out how.

“I thought, is there a formula that is as consistent as mixing two atoms of hydrogen with one atom of oxygen? You get water every time,” he says. “Is there an equivalent formula to create wealth?”

Technology being what it was at the

“I thought, is there a formula that is as consistent as mixing two atoms of hydrogen with one atom of oxygen? You get water every time. Is there an equivalent formula to create wealth?”

Engineering success But the eldest of nine children from northeastern Jamaica didn’t stumble into his wealth. There was most definitely a method to his wealth creation. While he might not have directly used the engineering degree he graduated with from McMaster University, the analytical mind he developed there shaped the investment philosophy that would serve him so well over his career.

Starting out his career, as far as he could tell, the biggest ‘value-add’ he could offer his clients was to make them wealthy. So he set

time, the answer wasn’t readily available.

“Unfortunately there was no Google,” Lee-Chin says. “But today, even if you Google it, nothing will come up that is prescriptive.

But I found the formula in 1978.”

He figured it out by analyzing the characteristics that were common to wealthy people in the world.

Lee-Chin found five key principles that were consistent among all wealthy people.

First, they own a few high-quality businesses.

Second, they understand those few businesses really well. Third, those businesses are in

PROFILE Name: Michael Lee-Chin Company: Portland Investment Counsel Title: Executive chairman, CEO, CIO and portfolio manager Years in the industry: 40 Career highlight: Borrowed money to purchase shares in Mackenzie Financial stock and used the proceeds of his investment to purchase AIC Limited in 1986 for $200,000

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PEOPLE

INDUSTRY ICON

strong, long-term growth industries. Fourth, they use other people’s money prudently.

Lastly, they hold those few businesses for the long run. “I just practiced that formula faithfully,” he says. “I dedicated my life to being a champion of that formula.”

While it’s all well and good having a formula, it wasn’t enough. It was too easy to stray from it, so Lee-Chin also developed three keys to ensure the formula’s success. “You have to make decisions based on a sound intellectual framework,” he says. “The second thing is we need to be consistent in our decisionmaking so we control our emotions. The third thing we need is access. If we have two but

do what I can to build a business that’s a role model for what a professional advice-giving organization should be like.”

It’s also a sign of the poor composition of Canadians’ portfolios. Canadians are put behind the eight ball in their quest to create wealth, with portfolios that look nothing like that of a wealthy person or an institutional investor. But as the man in charge of Portland Investment Counsel, Lee-Chin is developing that ‘role model’ for advisors to use.

“I’m giving people a framework so they can control their emotions, and I’m giving them access so that they can build a portfolio for themselves that is no different in quality or

MICHAEL LEE-CHIN’S THREE KEYS TO WEALTH CREATION

THERE MUST BE A DIFFERENCE BETWEEN PERCEPTION AND REALITY “Only when there’s a difference between perception and reality do you have knowledge arbitrage. If everybody knows the same thing, you can’t create any wealth.”

“Every advisor is being taught how to sell mutual funds or stocks, not to create wealth.

I see a lot of dysfunctionalities that are endemic in how advice is given ...” not the third, it doesn’t matter. We won’t be successful. We have to have all three.”

But when Lee-Chin applied the formula and framework to mutual funds, he was disturbed by the results. The product failed on all five counts. “There are trillions in this product – trillions! And it fails on the five points relative to why people are buying them,” he says. “We have an industry that’s totally dysfunctional relative to what the clients want and need.”

A model for the industry But the proliferation of mutual funds is only a byproduct of a larger concern around the quality of advice Canadians are receiving from the industry.

“Every advisor is being taught how to sell mutual funds or stocks, not to create wealth,” Lee-Chin says. “I see a lot of dysfunctionalities that are endemic in how advice is given and what clients end up with ... my cause is to

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construct from CPP or the Ontario Teachers’ Pension Plan, because they’re not getting it right now,” Lee-Chin says.

“We have to ask the question: Is CPP’s portfolio like the portfolio that every Canadian ends up with? If you go to a broker, you’re going to end up with a portfolio that is 100% publicly traded securities. Name one person in the world who created wealth by doing that. Nobody! But everybody has it.”

Spending any time with Lee-Chin, it becomes obvious his passion isn’t diminished, even though time is creeping up on him.

“I just turned 65, and age didn’t make a difference to me, but some mornings I wake up and think, ‘65?! 65?! This is crazy – it was just yesterday when I was 35,” he says. Indeed, just yesterday he was terrified, approaching people on their front lawns, and now he’s trying to change the financial advice paradigm in Canada.

THERE HAVE TO BE INEFFICIENCIES – OR BETTER YET, DYSFUNCTIONALITIES “Only when there are dysfunctionalities can you create outsized wealth. If everything is already efficient, you can’t. If things are already efficient, there’s no money to be made.”

THERE MUST BE A LACK OF EQUITY CAPITAL FLOWING INTO THE AREA “The opposite is when too much equity is flowing into an area, it pushes up the price, drives down margin, and it’s high-risk. Those are three preconditions we live by.”

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For Advisor Use Only. © 2016 Morningstar Research Inc. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete, or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. 1Morningstar RatingTM is the overall rating for Class F units as at December 31, 2015 and is subject to change monthly. Renaissance Optimal Income Portfolio, Class F received a Morningstar Rating of 5 stars over 3 years (338 funds rated) and 5 stars over 5 years (253 funds rated). The overall 5 star rating is calculated from a fund’s 3- and 5-year returns measured against 91-day Treasury bill and peer group returns. The top 10% of the funds in a category get five stars.

For greater details see www.morningstar.ca. 2MER annualized as at August 31, 2015. Please refer to the annual Management Report of Fund Performance for further details. 3Source: Morningstar Direct as at December 31, 2015. Risk-adjusted returns are measured by the Sharpe ratio for the Class F units of the fund over 5 years to December 31, 2015 and compare the ratio of the fund against the ratio of the average for the Canadian Fixed Income Balanced Category. (Fund: 1.12, Category Average: 1.03). 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. Please read the Fund Facts or the Renaissance Investments Simplified Prospectus before investing. Mutual funds are not guaranteed, their values may change frequently and past performance may not be repeated.®Renaissance Investments is offered by, and is a registered trademark of CIBC Asset Management Inc.

FEATURES

COVER STORY: ALTERNATIVE INVESTMENTS

THE ADVISOR’S ALTERNATIVE As market conditions continue to hamper returns for clients, alternative investments offer advisors another tool in the toolbox

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ALTERNATIVE INVESTMENTS are a staple of in the portfolios of family offices, pensions and other institutions, but they are conspicuously absent from the majority of Canadians’ portfolios.

“I view private equity/alternatives as complementary to traditional asset classes,” says Michael Prittie, portfolio manager and senior financial advisor at Capital Wealth Architects. “When one looks at the way wealth is created and maintained, whether it be in pensions, endowments or by the ultrawealthy, these alternative investments make up a large percentage of the investment solution.

has been embraced by other professionals, where there has been a significant shift to private equity and alternatives over the last 10 years?”

According to a Natixis survey released last year, 63% of Canadians said they wanted to invest beyond stocks and bonds.

However, only 41% of Canadians own alternative investments, compared to 50% of investors globally.

Why aren’t people using alternatives?

Part of the issue lies in a lack of education.

Only 34% of Canadian investors surveyed said they understood alternatives well,

“When one looks at the way wealth is created and maintained … alternative investments make up a large percentage of the investment solution” Michael Prittie, Capital Wealth Architects “Access to quality private investments has been the problem for private clients to date,” he continues, “with little or no motivation among the establishment to make private equity/alternatives available in any meaningful way. However, when you determine that the investment objectives are the same for a client, why would the strategy be different? Why would we not look at ways or means to emulate a portfolio that

compared with 54% in the US. Perhaps healthy markets have afforded both advisors and investors complacency toward alternatives. But that tune is likely to change soon.

“We’ve gone through a bull market over the last seven years or so, where your best returns have been in equities or even in fixed income,” says Matthew Maldoff, assistant VP, senior analyst and portfolio manager at Toron Asset Management. “I don’t think

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COVER STORY: ALTERNATIVE INVESTMENTS

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FEATURES

COVER STORY: ALTERNATIVE INVESTMENTS

TARGETING INVESTORS

DO WE HAVE THE RIGHT ALTERNATIVE INVESTMENT OPTIONS FOR A TYPICAL CANADIAN INVESTOR? As we are all well aware, the current market environment is driving leading global investors towards greater allocation of capital away from traditional equity and debt securities and into alternatives. Be it a desire to reduce exposure to the everincreasing volatility of global equity markets, to search for higher returns in a low-interest-rate environment, to search for less correlated returns, or a few hundred other reasons, the movement towards alternatives by large institutional investors and affluent families around the world and in Canada has been consistent over the past 20 years.

Interestingly, the shift toward alternatives has not been as pronounced among individual and/ or small institutional investors, who remain grossly underweighted relative to their larger-scaled peers.

The largest global pensions and endowments, along with the largest Canadian pensions, typically allocate around 30% of their assets into alternatives. Conversely, a typical highnet-worth investor or smaller pension/ institutional investor may only have 1% to 2% of their assets allocated to alternatives.

There are examples of certain high-net-worth investor groups with 30%+ alternative exposure; however, as with many controlled data sets, the information is skewed by its participants and is not overly reflective of the broader market that we all deal with on a day-to-day basis.

So this begs the question: Why do highly intelligent high-net-worth

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investors and smaller pensions not allocate more of their capital to alternatives?

The 2012 Alternative Investment Survey by Morningstar and Barron’s highlighted that advisors needed greater familiarity with alternatives.

Forty-eight per cent of advisors listed ‘lack of understanding’ as a top-three reason to hesitate before investing in alternatives, compared to only 15% of institutional investors who were hesitant for this same reason.

Fast-forward to the 2015 version of the same study: Only 16% of advisors now say they have a lack of understanding, compared to 13% of institutional investors. The ‘education gap’ has closed.

It is commonly believed that fees and liquidity are the two primary reasons advisors hesitate before moving into alternatives – both reasons have been near the top of the Morningstar/Barron’s study for the past few years. However, the same reasons are at the top of institutional investors’ list – in fact, according to the most recent study, institutional investors were more concerned about them than advisors – yet institutional investors buy alternatives.

Of course, high-net-worth investor asset allocation is not comparable on an apples-to-apples basis to a pension fund. A high-net-worth investor has other assets – such as a business, a home, art, family estate positions, insurance policies, etc. – that need to be considered in any allocation strategy. So let’s not be quick to say that everyone should have 20% to

30% alternative exposure in their investment portfolio. Additional non-investible asset composition and individual investment characteristics will impact alternative allocation decisions for any individual investor.

That said, anecdotal evidence tells us that the studies are directionally correct, and greater alternative allocation makes good sense for all investors, regardless of the size of their portfolio. The data clearly suggests it’s not a function of knowledge or desire, but a problem with product.

There are some obvious holes in the Canadian asset managers’ arsenal of products, which are directly impacting the ability of advisors to prudently increase their clients’ exposure to alternatives. Our alternative asset management community needs to solve for three problems to help our individual investor community – diversity, quality and liquidity.

A $50 billion pension fund is able to diversify its portfolio of alternatives to realize the return characteristics of alternative indices; however, an individual investor’s ability to diversify is limited. A high-net-worth investor with one to 10 alternative investments does not have a diversified portfolio and therefore is exposed to asset-level performance risks.

Private fund-of-fund alternative products exist to help diversify the asset-level specific risks to smaller investors; however, they typically do not offer a level of liquidity (and sometimes even quality) that makes sense for a typical investor, who may already have some illiquid assets such

there’s been a need for advisors to look elsewhere. Though, given the volatility that we’re starting to see and interest rates where they are, going forward, the use of alternatives will be an important part of a portfolio because sources of return are going to be much more difficult to find.”

Indeed, globally, alternatives have been as a house and a family business.

On the liquidity issue, the development of alternative mutual funds and ETFs in the US and Canada has started to address some of these concerns. There are still problems, however, with their level of diversity, quality and applicability. Liquid alternatives have grown dramatically to become a $600+ billion AUM market in North America. The Canadian market for liquid alternatives is limited by certain roles (limits on short-selling and leverage) and is still in the early stages of product development and asset management. The managers’ track record among underlying funds has been mixed, and they have not focused on the more traditional preferred strategies such as private equity, infrastructure and private real estate.

Alternative investments are an important component for the highnet-worth investor’s portfolio, and the sector is likely to grow in the near term with individual investments in unique product offerings. Widescale adoption doesn’t make sense, however, until the asset manager community can develop offerings that deliver the diversity, quality and liquidity that smaller investors require and deserve.

“Going forward, the use of alternatives will be an important part of a portfolio because sources of return are going to be much more difficult to find” Matthew Maldoff, Toron Asset Management steadily progressing. Alternative investing has more than doubled since 2005, hitting a record high of US$7.2 trillion in 2013, the most recent year data has been compiled for, according to management consulting firm McKinsey & Co. In addition, new flows into alternatives represented 6% of total assets that year, much higher than the 1% or 2% that made their way into traditional assets.

The buy-in could be coming to Canada even sooner: Regulatory reforms, especially Ontario’s relaxing of the rules for accessing private equity and alternatives in January, have already made a difference. The Ontario reform solves the chief issue of access, allowing more than just accredited investors to use alternatives.

“There has been more demand and ease of investment,” Prittie says. “With changes allowing a registered portfolio manager to act as the accredited person, we have much more ability to structure client portfolios.”

Getting into alternatives Jonathan Turnbull Managing director DUNDEE PRIVATE EQUITY

ances are suitable, and the offering is of high quality, with proven management that has their own money invested alongside yours,” Prittie says. “Another important but little-recognized fact is that the private equity sector is much larger than the public sector.”

Another crucial thing to keep in mind

For advisors who haven’t used alternatives or aren’t familiar with the space, there are a few things to keep in mind.

“Critical care must be taken to ensure liquidity matches client needs, risk toler-

is that, generally speaking, alternatives are designed with mid- to long-term investments in mind, which can have hidden benefits.

“Unlike public, it is not a year-by-year or month-by-month game, but a longer-term strategic approach,” Prittie says. “The illiquidity can, in itself, be a good thing. It prevents clients from selling at their point of capitulation when markets are down.”

When looking at the year ahead, Maldoff identifies hedge funds and private equity as the alternative investment vehicles of choice.

“The hedge fund industry has really changed from Soros trying to break the bank and mavericks running around doing what they want to a more institutionalized asset class,” he says. “There are strategies within that bucket that can perform quite nicely in market environment where you’re seeing a lot of volatility.

“On the other side,” he continues, “if liquidity is not a concern, the private equity and growth capital space could be very interesting. The longer-term play on those could also be very interesting because you don’t necessarily have to deal with the volatility of public markets.”

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COVER STORY: ALTERNATIVE INVESTMENTS

TARGETING EXEMPT MARKET INVESTORS

HOW TO TAKE ADVANTAGE OF THE EXEMPT MARKET

The new offering memorandum exemption in Ontario presents a great opportunity for advisors – and those who don’t embrace it risk getting left behind.

“Advisors who don’t have these options to present to clients are going to start losing clients’ money to these alternatives,” says Craig Skauge, president and chair of the National Exempt Market Association. “It doesn’t necessarily mean they’re going to lose their entire client’s portfolio, but they’re going to lose a portion of the funds if they don’t have something comparable to offer their clients. That money will be taken out of the markets and moved into these private opportunities.”

What it is The offering memorandum exemption was designed to facilitate capital-raising by allowing issuers to solicit investments from a wider range of investors than they would be able to under other prospectus exemptions, provided that certain conditions are met.

“What seems to be on most people’s radar is business opportunities and real estate – but real estate through the acquisition of a security,” Skauge says. “I want advisors to understand we’re not talking about crowdfunding here. This is very different than crowdfunding.”

The exempt market brings its fair share of risks, of course – liquidity being the primary one. However, Skauge says, “I’m sure there are many people that would attest today, liquidity itself could be a risk as the markets move the wrong way.”

Skauge also points out that such investments should be just one component of an investor’s portfolio.

“We’re not promoting for anyone to put all their money

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into private securities,” he says. “We’re just trying to promote it as a viable part of a portfolio.”

That’s something advisors should keep in mind when looking at dealers.

“Advisors need to be aware that reputable dealers aren’t saying that this is the holy grail of investment solutions,” Skauge says. “They’re not promoting that 100% of a client’s money should go into these illiquid alternatives. What’s being promoted is there’s a very viable component of an investor’s portfolio that should be held in alternatives.”

On the ground floor The exemption went into effect in mid-January, and a few advisors have already taken the plunge, although it’s not being widely adopted yet. However, Skauge thinks that’s only temporary, and that once a few success stories get out, the exempt market will really take off.

“It will be a snowball effect,” he says. “It will just get bigger and bigger, quarter by quarter. There was some initial hesitation, I believe, because it takes a brave soul to be the first one to file their exemption with the OSC. There’s been an initial hesitation to be the first one to take that leap. Once you see a few guys successfully use it in Ontario and once people see the OSC is actually OK with it, I think you’ll start to see mass adoption.”

“I think creating a real exempt market in Ontario is a two-step process,” he continues. “Step one was getting the exemption adopted, which happened. But step two, we need to get awareness of what this is and that it does exist. That takes arguably as long as it did to get the exemption pushed through.”

WHISKY

THE REAL LIQUID ALTERNATIVE

Whisky is growing in popularity as an asset class, but it’s less than straightforward. It’s also downright iffy.

“As an asset class, it’s really quite complicated,” says Jonathan Driver, rare whisky director at Whyte & Mackay. “It’s quite unpredictable in the short term. In a two- to three-year horizon, I think it’s quite risky.”

But in the mid- to long-term, he argues, “you can be pretty safe if you’ve done your background research because there’s absolute rarity. There are distilleries that no longer exist. As long as they have a reputation with the quality of the spirits and they don’t exist, then there’s sort of an algorithm that gets

into quite a safe mid- to long-term investment.”

One of the brands under the Whyte & Mackay label is The Dalmore, which Driver is responsible for. The Dalmore 62 sold earlier this year in Singapore for just over $250,000.

One of the most expensive bottles ever sold is a 64-year-old Macallan, which was bought at auction for $922,858.

Those are just a couple of examples of the astronomical prices some of these bottles can fetch on the market, uncorking whisky in the minds of investors as a rising asset class. In fact, during the first half of the year in the UK, record numbers of bottles of rare whisky were sold at auction, according to the consultancy Rare Whisky 101, which compiles a range of indices on the secondary market for Scotch.

Advisors who think this trend will leave them in the cold need only look at the World Whisky Index and Whisky Invest Direct as examples of the alcohol’s growing acceptance as an equity to hold. Although the luxury whisky market is still in its infancy, the growing upper class in Asia could help push it into exponential growth. And as the advice industry moves in the direction of fee-based advice, wealth professionals can play a part in vetting these products as good investments.

“What do boys collect? There’s not much; there’s wine,” Driver says. “Fine wine is a zero-sum game because there’s not that much of it around. Whisky as an asset class has the prospect of a growing interest in the future because it’s what we all do.”

VINTAGE CARS

THE ALTERNATIVE INVESTMENT SUPERSTAR In 2015, vintage cars were the best-performing alternative asset class tracked by Bloomberg, returning 13% through June 30 and an average of more than 25% a year for the past three years, according to Londonbased Historic Automobile Group International. It’s pretty much been that way since the 2008 financial crisis, as investors have piled into the market looking for hard assets with reliable returns. Indexes that track classic car values have recorded double-digit returns every year for seven years.

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COVER STORY: ALTERNATIVE INVESTMENTS

HEDGE FUNDS

TIME FOR HEDGE FUNDS Market volatility and uncertainty are shining a positive light on hedge funds

Last year was an especially strong one for Canadian hedge funds. Despite broader declines in the major global indices, including an 11.09% drop in the S&P/TSX Composite Index, Canadian hedge fund managers collectively returned an average of 6.21% in 2015.

While a portion of Canada’s collective hedge fund success was due to the strength of the US dollar and the subsequent bump some strategies received on their US dollardenominated positions, it was still a strong showing – and proof that hedge funds continue to serve a purpose as a much-needed diversification tool within a broader portfolio. It also speaks to the unique standing that the Canadian hedge fund industry holds in relation to other asset classes.

And there’s much more to come.

“Canada is a land of persistent market inefficiencies,” says James Burron, chief operating officer of AIMA Canada, the Canadian national group of the London-based Alternative

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Investment Management Association, which represents more than 1,700 corporate members globally, including more than 100 corporate members in Canada. “It’s not well-analyzed, not wellresearched. We’re smaller and 3% of the world market. Is that a bad thing? Well, for investors, if you have a manager who knows those trades, there’s a way to make money at this. It’s more difficult to do in the global markets to some extent.”

It also helps that Canada has a high concentration of good managers. “They’re all fairly well-read and well-trained,” Burron says. “They don’t go into the whole group think. They all come at it from their own angle, which can work. The worst two words you can hear from anyone managing a fund are ‘crowded trade.’ If it’s a crowded trade, someone is going to be left holding the bag at some point.”

Open access While hedge funds have traditionally been the domain of institutions and high-networth investors, that is soon to change, as ‘retailization’ comes to Canada – which

will make hedge funds as accessible to investors and advisors as mutual funds or even ETFs, Burron says.

Indeed, as hedge funds become both more mainstream and more accessible, and as advisors and the industry become more educated on what they do and how they fit into a broader diversified portfolio, their acceptance as an investment vehicle should grow.

“Advisors generally want investments that produce positive returns for their clients and preserve capital during times of market stress,” Burron says. “Hedge funds do both of these things, which are especially important versus a long-only portfolio when markets are facing steep declines, which makes them appropriate for many advisors to recommend to their clients.”

Burron sees the evolution of the industry toward retail channels as a natural step, similar to what the mutual fund industry went through some 20 years ago.

“It’s very much like mutual funds and stocks,” he says. “In the 1890s, you only bought bonds. You didn’t buy stocks – that was seen as crazy. But then stocks came on. Then mutual funds came on.

Now hedge funds are coming on. Who knows what’s next, but hedge funds will probably have a few decades.”

By extension, the very nature of hedge funds – including the ability to go short and to invest in ways that are not tied to a particular benchmark – will contribute to their appeal among investors.

“It gives people real, true diversi­ fication instead of saying you have a thousand stocks in your three different mutual funds,” Burron says. “You have these factors that move securities prices, and as they move those prices in different ways, you get a different performance.”

HEDGE FUND STRATEGIES Hedge funds don’t operate the same way as mutual funds, and it’s important for advisors to understand the subtleties in their strategies.

“With mutual funds, there’s momentum, value and growth, but with hedge, you have a numerous different strategies and methodologies,” says AIMA Canada’s James Burron. “Once advisors understand the basic strategies and the types of strategies, it’s a lot easier. If you have a few strategies in there, they’re going to be acting very different from your long-only stocks and mutual funds and bonds.”

There are two main camps when it comes to strategies: directional and non-directional. The former moves somewhat with the market, while the latter does not.

DIRECTIONAL 1. Long-short equity

Buying stocks that are cheap and shorting ones that are expensive A fairly uncomplicated strategy that provides both potential positive returns as well as portfolio diversification

HEDGE FUND FAST FACTS Alfred Winslow Jones is credited with forming the first hedge funds in the 1940s. In 1966, a Fortune article brought Jones into the spotlight, pointing out that the sociologist’s fund had outperformed the best mutual fund over the previous five years by 44%, despite its managementincentive fee. On a 10-year basis, Jones’ hedge fund had beaten the top performer by 87%.

It is said that Jones would tell people that his profit share was modeled after Phoenician merchants, who kept a fifth of the profits from successful voyages. However, it’s believed he made this up to impress his investors.

While the traditional structure is a 1% to 2% management fee taken from the value of the investment made on an annual basis, and a 20% performance fee of the profits of the fund per year, these numbers are coming down as institutional investors negotiate deals and seek better alignment of interest. Also, the performance fee usually only applies above a watermark or hurdle in most hedge funds.

2. Event-driven

Buying stocks (and sometimes other securities) that are the target of a merger or ‘good news’ catalyst, and shorting the acquirer in a merger or open to a ‘bad news’ catalyst Includes merger arbitrage

HEDGE FUND RETURNS

Average return

Arbitrage

+1.34%

+0.33

Credit

-0.56%

-0.51

Distressed securities

-6.81%

-2.21

Emerging markets

+2.28%

+0.27

Equity market neutral/quant

+10.44%

+3.38

Event-driven

-5.42%

-0.70

Long/short equity

+6.79%

+1.36

Macro

-1.05%

-0.20

Managed futures

+0.14%

-0.01

Multi-strategy

+5.65%

+2.46

Relative value

+2.80%

+1.48

Typically based on news related to corporate mergers, acquisitions and takeovers NON-DIRECTIONAL 3. CTA [Commodity Trading Advisor]/managed futures

Going long or short on interest rates/bond prices, currencies, commodities and/or stock and index futures, usually based on momentum or trend-following Typically non-correlated, with the ability to produce profits/returns in periods of market stress Generally very liquid 4. Fixed-income arbitrage

Long or short bonds or other debt instruments, either of one company, between two companies, between a company and a benchmark (such as a Government of Canada bond) or within the capital structure of a company (subordinated versus unsubordinated) Generally more complicated structured trades, but the essence is the ability to profit in fixed-income instruments (low volatility) with no or low correlation with interest rates and stock market moves Provides for the possibility of returns in excess of just holding bonds

Risk-adjusted return as measured

by Sharpe ratio

Strategy

Source: HedgeFund Intelligence, AIMA

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REAL ESTATE

Q&A: THE LOWDOWN ON PRIVATE MORTGAGE LENDING What are the main trends you’re seeing in real estate investment?

With the protracted instability in the global financial markets, investors are actively looking for returns in alternative investment opportunities. Real estate investments are increasingly becoming the option of choice. With more education in the marketplace regarding different real estate investment option structures such as flipping, renting and private lending, more investors are engaging advisors outside of the traditional investment channels to help them through the real estate investment process.

What about private mortgages?

Similar to a traditional mortgage, where there is a lender and a borrower, a private mortgage transaction occurs when a private lender issues financing to a nontraditional borrower.

The lender in a private mortgage is not a traditional mortgage lender like a bank, but rather can be a person or a private lending firm.

The borrower in a private mortgage transaction either chooses not to work with a traditional mortgage lender, or may not be able to meet the prescribed lending guidelines of a traditional mortgage lender. Private mortgages are secured by the real estate property in the transaction and can come in the form of first mortgages, second mortgages and blended (first and second mortgages), depending on the investor’s risk appetite.

Second mortgages are higher-risk and carry with them a higher return premium. We see in our business that the borrowers of private funds are frequently individuals who have gone through a rough time in life, either from separation, divorce, loss of employment, critical sickness or crippling debt levels. Borrowers generally have equity in their properties; however, they regularly have poor credit scores or no T4 slips to verify income. Pangea Mortgage & Financing Solutions specializes in private mortgage transactions ranging from $100,000 to $1 million. Approximately 60% of the private mortgages we do are second mortgages, 30% are first mortgages, and 10% are blended mortgages.

What are the pros and cons of private mortgages as part of a portfolio?

Three pros of having private mortgages as part of your portfolio are 1) investment diversification by adding a different investment type to your portfolio, 2) predictable

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returns outlined in a payment schedule and structured return-of-capital timelines, and 3) increased investor confidence in knowing exactly where their investment dollar is – registered as a charge on the property.

As for the cons of having private mortgages as part of your portfolio, these types of investments are generally illiquid because the investor is committing the funds for a fixed term, which locks up the money, providing little to no access to the investment. Default risk is a probability, and in the event of default, the investor may not recover 100% of the investment. Finally, the high complexity of structuring private mortgages, including administration like contractual legal paperwork, makes these investments difficult to understand for some investors.

Is it better to invest in private mortgages as part of a mortgage investment corporation, then?

A mortgage investment corporation [MIC] pools money from multiple investors to solicit mortgage-lending services through one pooled fund. In this structure, you reap the benefit of attractive returns with little to no active management of the lending, collection of payments, due diligence and selection of borrowers.

One negative aspect of a MIC structure is that you have less control over who your money is loaned to. Another area of risk within the MIC structure is a deficient risk management framework. If the MIC goes bankrupt, you have no actual security of the property, and you can potentially lose your investment funds.

How is that different from a syndicated mortgage?

A syndication is when a group of investors pool their money together and lend to one specific real estate property.

The difference between a syndication and a MIC is that a syndication is property-specific, and each investor, not a corporation, is registered on the title of the subject property.

A syndication provides predictable returns, an increased level of security and more control over the selection of the borrower.

What advantages does the private route offer over publicly traded real estate investment trusts [REITs]?

While REITs, in most cases, offer more liquidity to the investor, the investor generally will be paying annual management fees and not have control over where and to

LIQUID ALTERNATIVES

THE NEXT BIG THING whom their money is deployed. With private mortgages, the investor will have more control and transparency. Investor comfort also increases because of the tangible security of real property.

What are some of the main things an advisor should keep in mind when looking at private mortgages?

A prudent advisor will evaluate potential private mortgage deals with multiple considerations. At Pangea Mortgage & Financing Solutions, our private mortgage selection matrix considers several factors, including, among other things: Will the investor and/or lender in the deal receive their payments and have security that their investment will be returned? Will a private mortgage solve the problem that the borrower is having, and will the borrower be able to pay the private mortgage?

We recognize that generally, private mortgages are a temporary solution. We support the borrower to improve their financial circumstances through our financial improvement process that usually ranges from 12 to 24 months, depending on the borrower’s circumstances.

As the borrower’s financial position improves, they can transition from the private mortgage to a traditional mortgage, which we arrange for them at a more appealing rate.

Ian Vilafana Senior mortgage agent PANGEA PRIVATE FAMILY OFFICES

Liquid alternatives are sweeping the US by storm, and it’s only a matter of time before they really start to make an impact north of the border.

With inflows of more than US$40 billion in 2013 and another US$37 billion in 2014, liquid alternatives currently comprise the fastest-growing category of alternative investments in the US. “Alternatives are rapidly moving into the mainstream retail market … as retail investors, confronted with volatile financial markets and the underfunding of their own retirements, follow the path blazed by institutional investors,” noted a McKinsey & Company study.

Liquid alternatives marry alternative strategies used by traditional hedge funds with the transparency and liquidity of retail mutual funds. The most common benefit of these types of products is enhanced risk reduction and the potential to improve the risk-adjusted performance of a traditional portfolio.

However, they aren’t without their own set of risks. The biggest disadvantage is underperformance – on average, liquid alternatives haven’t returned as much as stocks in bull markets. On the other hand, they also haven’t been down as much as stocks in bear markets.

As with all alternatives, it’s vital to remember the role liquid alts play within a portfolio, which is to provide risk reduction and decrease the volatility of the overall portfolio. By design, liquid alternatives shouldn’t be the primary contributor to capital appreciation.

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SPECIAL PROMOTIONAL FEATURE

ALTERNATIVE INVESTMENTS

NEW TRADITIONS As fixed income and equities struggle, Sprott Asset Management’s strategies offer advisors a viable alternative

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ADVISORS HAVE to get used to an alternative reality for traditional asset classes.

As stocks face increasing volatility and fixed income struggles due to continuing low interest rates, alternative approaches are gaining in popularity as a way to generate reasonable returns for clients.

“We’ve transitioned to a different kind of marketplace – certainly in the equity, bond and foreign exchange markets – where it’s much more uncertain,” says John Wilson, CEO, Co-CIO and Senior Portfolio Manager at Sprott Asset Management. “I think your average advisor is realizing they’re going to need more of an alternative solution than just their standard tool set. Risk is presenting itself far more frequently, so it’s probably a good time for alternative strategies now.”

Alternative approaches have gained more traction amid challenging market conditions as a way to offer investors a reasonable return – and some of those alternative strategies are spilling over and being applied to more traditional equity and fixed-income investments.

“Alternative strategies have grown from being only employed by hedge funds to being offered in a variety of different investment solutions,” says Scott Colbourne, Co-CIO and Senior Portfolio Manager at Sprott. “It’s simply a matter of offering innovative solutions that people can’t get in a traditional manner.”

“Whether you use derivatives, shorting or leverage, at the end of the day, alternative strategies give you more tools to be more defensive and/or more opportunistic,” adds Mark Wisniewski, Senior Portfolio Manager at Sprott.

ALTERNATIVE STRATEGY: ENHANCED EQUITY In an environment where investors can no longer rely on buy-and-hold’ strategies and markets are increasingly difficult to predict, the Sprott Enhanced Equity Strategy offers a unique way to invest – and stay invested – in equities, available through mutual funds or hedge funds.

This strategy seeks to achieve long-term capital growth by investing primarily in Canadian and US equity securities. It provides downside protection through the use of option strategies and tactical changes to the amount of its equity exposure, and is suitable for investors with a longer-term time horizon.

“It uses index options – the right to buy the index at a certain future price – as market insurance against large downdrafts in equity markets,” says John Wilson, who runs the fund. “So while it may not generate as much upside return, it’s designed to help shelter the downside. This is not your standard fund that buys a bunch of bonds or buys a bunch of stocks. The Enhanced Equity funds are a different way of thinking about risk management.”

A new era of alternatives Over the years, alternative strategies have had to overcome a few challenges – one of the biggest being a lack of access for the average investor. They also have struggled to overcome a negative perception within

“Strategies that can help shelter the client from volatility are important in this environment” John Wilson, Sprott Asset Management www.wealthprofessional.ca

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SPECIAL PROMOTIONAL FEATURE

ALTERNATIVE INVESTMENTS

ALTERNATIVE STRATEGY: CREDIT INCOME OPPORTUNITIES Interest rates are at historic lows, and generating yield has become a challenging pursuit. As traditional bond funds struggle to deliver low-risk income, investors are being forced to take on more risk for less yield.

Sprott’s Credit Income Opportunity strategy seeks to provide investors with income and capital appreciation by primarily investing in Canadian, US and international fixed-income securities for shortand long-term gain. The strategy is a combination of two distinct portfolios: a core portfolio of lowduration, laddered corporate bonds, and an overlay portfolio of high-quality (investment-grade) bonds that are protected from interest rates.

For example, a manager short-sells a government bond yielding 1%. Using the proceeds, the manager buys a high-quality corporate bond that yields 3.5%. The difference between the corporate and government bond yield (credit spread) is 2.5%. If two times leverage is applied, the return is 5%.

Most important, short-selling the government bond provides a hedge against interest rate exposure.

“Basically what I’m doing is leveraging the credit spread,” says Mark Wisniewski, who runs the strategy. “The difference between the Government of Canada bond and the corporate bond is what I’m earning. There are a handful of us who are starting to do this, and the acceptance is getting really, really good. When you’re shorting governments and buying corporates, you’re hedging out all the interest rate risk. When you can invest in a fixed-income fund that has very low duration and higher income in this environment, it’s way, way more defensive.”

Wisniewski also uses different types of income-producing vehicles, such as preferred shares, selective high-yield bonds and secured loans.

“When you put it all together, I can get a much better yield than a fund that’s focused on doing only one thing,” he says.

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the industry, as many equate ‘alternative’ with ‘risky.’ But the needle appears to be moving on that score – high-octane, highstakes investments are being replaced by more precise investment tools that have the potential to deliver a range of desirable outcomes.

“A little bit of what’s going on is that a lot of investment advisors are getting their heads around the fact that alternatives actually aren’t riskier than existing products,” Wisniewski says.

But it’s not just a more informed investor and advisor community that’s pushing alternatives into the public eye – a confluence of market factors is contributing as well. For generations, Canadians have been

return, you have to take on more risk,” he says. “To take on risk that is better balanced and better put together, I think you need to be in an alternative as opposed to a traditional fund.”

While returns are low now, there might be even more pain when interest rates rebound, Wilson points out.

“It can still be a fairly painful exercise to own fixed income and have interest rates move up to 1% or 1.5%, because the actual value of your investment will decrease,” he says. “People are looking at an alternative way to own fixed income that’s maybe a little bit more protected from that type of environment.”

Compounding the issue is the volatility

“Alternative strategies have grown from being only employed by hedge funds to being offered in a variety of different investment solutions. It’s simply a matter of offering innovative solutions that people can’t get in a traditional manner” Scott Colbourne, Sprott Asset Management brought up on the idea that you saved and then lived off the income of your nest egg.

“Now, you may have kept up your part of the bargain, but investors are increasingly finding that there’s no income to be made off that nest egg, and that’s a very difficult state of affairs for people,” Wilson says.

Plummeting interest rates are one of the main reasons why there’s little income to be made from bonds, Wisniewski adds.

“The problem is that interest rates have gone so low, they’ve dragged everything else along with them, so if you want to earn a

of the markets. People got used to central banks having all the answers – or at least seeming like they did. But now, as central banks have proved unable to energize the kind of global growth people were hoping for, investors are left with the volatility that’s been hampering the markets.

“It’s hard for people to manage,” Wilson says. “People have this big nest egg, and they’re looking at bonds and saying, ‘Well, I can’t earn enough interest there; I might as well put it in stocks.’ Then you’re forcing them to ride out the volatility of the stock

AN ADVISOR’S ALTERNATIVES CHECKLIST Clearly understand the strategy Make sure the strategy fits the client and that they understand the strategy Make sure the partner has a broad range of alternative products to choose from Learn and understand the fund manager Understand both the pros and cons of the risks in the fund Look for transparency

“The problem is that interest rates have gone so low, they’ve dragged everything else along with them, so if you want to earn a return, you have to take on more risk” Mark Wisniewski, Sprott Asset Management market, which was OK for the last few years when central banks were more effective. Now it’s become much more difficult.

“Strategies that can help shelter the client from volatility are important in this environment,” he continues. “Solutions like our alternative income strategies that can generate a steady rate of income regardless of what’s happening in public markets are important complements for investors.”

Advisors’ altered thinking As Sprott continues to strengthen its position as ‘your alternative,’ it has created

ALTERNATIVE STRATEGY: DIVERSIFIED BOND FUNDS As low interest rates continue to hamper fixed-income returns, Sprott has devised a mutual fund solution with a flexible approach. The Sprott Diversified Bond Fund’s investment objective is to maximize total return and provide income by investing primarily in debt and debt-like securities of corporate and government issuers from around the world.

“It’s a nontraditional approach to running fixed income,” says Scott Colbourne, who manages the fund.

“At the end of the day, it’s a solution that typically generates a lot lower volatility than traditional long-only Canadian bond funds, because traditional managers typically don’t seek to manage the risk in those funds. I draw upon a variety of methods to both manage risk and enhance returns when appropriate.”

The other issue in higher-yielding and credit portfolios is credit risk. “Most credit risk funds are typically long and often levered, so we take a slightly different approach,” Colbourne says. “Plus, our solution is wrapped up in a mutual fund, so it’s more available to all investors.”

The main risk in typical Canadian bond funds is interest rate risk. “Traditional managers are more focused on managing to an index than managing total return,” Colbourne says. “I can manage my interest rate risk as is appropriate.”

a diverse range of funds that offer advisors innovative solutions to their clients’ investment challenges.

However, advisors who are ready to use alternative strategies should do their due diligence and avoid misconceptions about exactly what an alternative product does.

“People sometimes buy alternative strategies and then expect them to behave like your standard, long-only products, and that’s not what they’re designed to do,” Wilson says. “Really understanding what they do and what their outcomes are supposed to be is important.”

To be sure, in light of ongoing market volatility, it will only be a matter of time before the alternative space is embraced by the mainstream.

“You’re going to see, over the next year or two, a number of traditional asset managers announcing they’re getting into alternatives,” Wilson predicts. “The thing is, you don’t snap your fingers and suddenly do alternatives. There are resources, capabilities and especially culture that go into being successful with alternative strategy products.”

In the end, though, alternatives are something advisors simply can’t ignore.

“The reality is, you can’t make return unless you take risk,” Wisniewski says.

“Alternative funds are better constructed to manage that risk.”

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FEATURES

ETF PORTFOLIO CONSTRUCTION

ETF PORTFOLIO CONSTRUCTION WORKSHOP Wealth Professional’s regular look at building a better ETF portfolio

WELCOME TO Wealth Professional’s ETF portfolio construction workshop, a regular feature that taps the plans and thoughts of Canada’s biggest ETF providers and most successful advisors.

This month’s feature uses the experience of Justin Bender, portfolio manager at PWL Capital.

The subjects of this month’s case study are the Duxburys, a fictional Vancouver couple in their late 40s with three kids.

They’re focused on saving for retirement while finishing paying off their mortgage and getting two of their kids through university.

Overall asset allocation The Duxburys’ total investment assets are $275,000; the asset mix is 20% cash, 20% fixed income and 60% equities. This balanced portfolio should give the Duxburys the returns they need to achieve their retirement savings goals while meeting their other obligations.

About the advisor Justin Bender joined PWL Capital after two years in client service with a major mutual fund company He’s been with the firm just

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INVESTOR PROFILE Ronald Duxbury and his wife, Christine, are a married couple in their late 40s with three kids. Both have good jobs; their household income is $220,000. They are close to paying off their mortgage and are helping put two kids through university. (The third recently graduated.)

Their focus now is on saving for retirement. They have $150,000 in their RRSP and $45,000 in their TFSA, plus an additional $80,000 for investments.

Their risk tolerance is low to medium, and their investment knowledge is low.

under a decade. He takes a client-centred approach to wealth management and is committed to disciplined investing strategies that focus on keeping costs and taxes low.

“Our investment philosophy is based on science, not fads,” he says. “There is overwhelming academic evidence that stockpicking and market-timing are not likely to add value; the wisest approach is to simply capture the returns of the global markets.

While many portfolio managers attempt to add value with forecasts and guesswork, we add value for our clients by focusing on what we can control.”

ABOUT POWERSHARES CANADA

PowerShares’ Fundamental Index smart beta ETFs are a great solution for taking a long-term strategic position in small-cap stocks. PZW and PZC ensure investors are getting a broadly diversified portfolio that ignores overpriced and overheated sectors by focusing on company fundamentals like sales, cash flows, dividends and book value.

PORTFOLIO BREAKDOWN CASH 20%

FIXED INCOME 20% VANGUARD CANADIAN AGGREGATE BOND INDEX ETF (VAB) This fund holds a diversified portfolio of high-quality Canadian bonds – it’s about 80% government bonds (federal, provincial, municipal and agencies) and 20% corporate bonds with maturities from one to 25 years, with an average term of about 10 years. All the bonds are investment-grade, which means they have an extremely low likelihood of default. The fund carries an annual fee of 0.13%.

EQUITIES 20% VANGUARD FTSE CANADA ALL CAP INDEX ETF (VCN) This fund offers exposure to Canadian stocks. It includes approximately 250 of the largest public companies in Canada and covers about 95% of the country’s stock market. About one-third of the fund is made up of banks and other financial institutions, and another quarter is energy producers (oil & gas). The ETF carries an annual fee of 0.06%.

20% VANGUARD US TOTAL MARKET INDEX ETF (VUN) This gives you exposure to US stocks. The fund holds more than 3,800 stocks, covering about 99% of the US stock market, which is the largest and most broadly diversified in the world. The ETF includes significant holdings in information technology, healthcare and consumer retailers, all of which are lacking in the Canadian market. The fund has an annual fee of 0.15%.

16% ISHARES CORE MSCI EAFE IMI INDEX ETF (XEF) This covers the stock markets in developed countries overseas. The fund includes more than 1,700 stocks – about two-thirds of its holdings are in Europe (primarily the UK, France, Switzerland and Germany), and the remaining third is in the Asia-Pacific region (primarily Japan and Australia).

The fund’s annual fee is 0.22%.

4% ISHARES CORE MSCI EMERGING MARKETS IMI INDEX ETF (XEC) This covers the stock markets in emerging economies around the world. The fund includes about 1,800 stocks; the largest holdings are in China, South Korea, Brazil, Taiwan, India and South Africa. The fund’s annual fee is 0.26%.

ETF Q&A Christopher Doll Assistant vice president, product management PowerShares Canada Why are ETFs a good fit for portfolios?

ETFs provide much lower costs compared to traditional mutual funds.

This allows the investor to keep most of their returns, especially in fixed income, where returns are low due to low interest rates.

Are there any specific types of subsector ETFs that work best?

Basic ETFs follow market-cap-weighted indices that track a specific market. However, the biggest drawback of market-cap-weighted indices is that they can tilt toward overvalued companies. An example of this is during the tech bubble of 2000s, Nortel had a 30% weight in the S&P/TSX Composite Index, which subsequently fell after its collapse.

Smart-beta ETFs follow alternative security selection and weighting with the goal of outperforming the market-cap-weighted benchmark, reducing portfolio volatility or both.

Given current market conditions, how can PowerShares help older clients who are looking for return while still protecting them from volatility?

Our Low Volatility suite of equity ETFs can help investors stay in equity markets while reducing the volatility of a portfolio. Low Volatility strategies help reduce drawdowns during volatile periods. Compared to high-volatility investments, which can erode principal quickly, lowvolatility strategies don’t have to rise as much in value to recover their pre-downturn value.

S&P Low Volatility Indexes, which our suite follows, offer unconstrained exposure to the lowest volatile stocks from a universe. For example, the S&P 500 Low Volatility Index, the underlying index to our ULV, provides exposure to the 100 least volatile stocks from the S&P 500.

For fixed income, investors can look to PSB, our 1-5 Year Laddered Corporate Bond strategy, which is less sensitive to changes in interest rates due to its lower duration, manages reinvestment risk due to its laddering construction, and avoids some of the risks associated with sharp interest-rate movements, which results in a less volatile experience over time. In addition, investment-grade corporate bonds provide higher yields than government bonds, especially in this low-interest-rate environment.

What tips do you have for advisors who are looking to help clients with low investment knowledge navigate the complex ETF landscape?

Advisors should look to ETF providers for more information on ETFs and their strategies. Many providers have tools to help advisors explain the benefits of ETF investing and have client-friendly materials for support.

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PEOPLE

ADVISOR PROFILE

Beating a bad break A broken neck turned into a blessing for Dian Chaaban, taking her on a series of twists and turns before she landed in wealth management

EVEN THE best-laid plans can be derailed in the blink of an eye. Dian Chaaban, an investment and wealth advisor with RBC Dominion Securities, knows that all too well.

A little less than a decade ago, Chaaban was an aspiring corporate lawyer getting ready to write the LSAT. However, an awkward tumble at a cottage left her with a broken neck. Following a seven-hour surgery, her sixth vertebra was replaced, and Chaaban was back at square one, learning how to walk again. Little did she know that the accident would lead her into a series of unexpected job and career opportunities as she discovered a world beyond law.

“In that moment, my entire life just changed,” Chaaban says. “I had this perfectly calculated trajectory planned, and then I couldn’t write the entrance exam. In hindsight, I dodged a bullet by not writing the LSAT because I don’t think I wanted to be a lawyer for the right reasons.

“I’ve always been a positive person, and this injury gave me the gift of perspective,” she continues. “My x-ray is blown up and framed in my office as a constant reminder about the obstacles I’ve overcome. Even when there is a bad day in the markets, I’m reminded to always keep a positive outlook.”

Realizing that she loved the economics portion of her commerce degree, Chaaban decided to go into banking, where she initially worked as a banking advisor at RBC in Toronto. She eventually moved on to the

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bank’s Dominion Securities arm, where she worked as a national business development consultant.

Travelling across the country, Chaaban educated advisors on best practices, ideas and tactics to grow their businesses and better serve clients. Eventually, Gary MacDonald, VP and regional director for Metro Toronto and Northern Ontario at RBC Dominion Securities, suggested Chaaban consider becoming an investment advisor herself. “I was flattered by his support in me,” she says.

“It was a no-brainer that this is what I was meant to do – so I slept on it and decided to follow his advice the next day.”

Starting from scratch Chaaban has no regrets, but it wasn’t easy.

“I had to build my business from scratch,” she says. “However, I had become an expert in the business development side, and I knew that being a part of RBC Wealth Management would allow me to offer prospective clients

resources and scale that are unparallelled in this industry. It was a significant advantage as I stepped into this new role.”

Chaaban was able to build a strong client base by networking, approaching clients with a long-term relationship in mind, and leveraging RBC’s leading resources.

“One of RBC’s unique offerings is our Wealth Management Services team,” she says.

“This is a team of several hundred professionals who support RBC advisors with tax, estate and financial planning for our clients.

I am in constant contact with this team to bring in the right specialists to solve client challenges and provide value-added planning services beyond investment management.”

This collaborative approach has been a big help in fostering relationships with her clients, from individuals and families to business owners and entrepreneurs.

“Throughout my time at RBC, our approach has always been, and always will be, to put the needs of our clients first,” Chaaban

HOW DO YOU DEFINE SUCCESS? This question is central to Chaaban’s relationship with her clients. “Each of us defines success in our own distinct way,” she says. “It’s what drives us. It’s the motivation behind the hard work that we put into each and every day. It’s the reason for those early mornings and late evenings at the office. It’s the sacrifices we make for family and friends.

It can be as pragmatic as a saving for a down payment on your dream home or taking that vacation you’ve always longed for in the Mediterranean. It’s providing your children with a limitless education. It’s building a thriving business that you’re passionate about. It’s being able to retire early and learn a new sport or language. It’s taking proper care of your aging parents. It’s buying that family cottage in Muskoka. Or maybe it’s leaving a lasting legacy to an organization or charity that influenced your life.”

FAST FACTS Dian Chaaban Investment and Wealth Advisor RBC DOMINION SECURITIES

Hobbies

Bikram yoga

Crossfit

Golf

Volunteer work Former director for the University of Guelph Alumni Association Founder of Gryphons on Bay Street Active member of the RBC Dominion Securities Women’s Advisory Board Chaaban’s team

“My injury gave me the gift of perspective. Even when there is a bad day in the markets, I’m reminded to always keep a positive outlook” says. “Through our collaborative process, we help clients define, reach and preserve what is most important in their financial lives.”

In addition to her work as an advisor, Chaaban is also a former member of the RBC Dominion Securities Women’s Advisory Board.

“As the transfer of wealth to women continues to increase, the wealth management industry will need to adapt to the change in demographics,” she says. “RBC has made it a priority to hire more women advisors, and

I’m proud to play a role in shaping the next generation of advisors.”

It might have taken a broken neck, but in the end, Chaaban is in a career where she’s found some meaning.

“It’s really a privilege and a beautiful thing to have people trust you with their life savings and to know that I will be able to grow with them over the years and mange their money, their kids’ money and their grandkids’ money,” she says. “I’m excited to do that over the next 30 years.”

Accountants Lawyers Financial planning consultants Business owner specialists Insurance specialists Private bankers Personal and business banking partners Clientele Busy professionals, executives, business owners and entrepreneurs Young professionals and entrepreneurs taking their careers to the next level Women looking for an engaging and holistic experience with their financial advisor Retirees seeking a conservative investment savings and income strategy Well-established families with complex intergenerational financial situations

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FEATURES

CORPORATE RETREATS

Are corporate retreats worth it?

Nikki Fogden-Moore explains why strategic escapes are essential for creativity, performance and leadership THERE’S A shift occurring in the business world that is happening outside the office – conferences and retreats are becoming the norm. The agenda is shifting from bar voucher to spa voucher, from boardrooms indoors to holding meetings outdoors – even on surfboards. So, is this working?

Despite a backlash in the US many years ago about lavish retreats (after AIG executives reportedly spent more than $400,000 on a corporate retreat after receiving government bailout money in 2008), corporate retreats are back in vogue – and rightly so, for they can provide a crucial, authentic timeout for leaders and key teams to reconnect, assess productivity and build shared purpose at even the most challenging times.

The corporate retreat is a vital part of the strategic year for companies that value their team as much as their bottom line.

The trick is to ensure you plan your retreat like you would your business: Who should be there, what is your budget, and do you have your purpose? With the right team running this with you, an annual break away for body and mind could be the perfect formula to keep your team healthy, wealthy and wise. After more than a decade of running corporate and boardroom retreats worldwide, I can give you three reasons why the well executed ones work.

1

Creativity

Creativity requires space to think and environments that can inspire. Providing a digital detox and fresh perspective for your team can get the brain off autopilot and

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into fifth gear with energy and vision. Like the saying goes: Keep doing the same thing, and you’ll get the same results. So instead of repainting the office walls and moving some plants around, plan in creative breaks during your strategic corporate retreats that truly allow time to reflect, think and indulge in ideas, as well as space to offer feedback.

If you want to see changes in the level

of creative thinking, initiative and a fresh approach to corporate challenges, then the best thing to do is create a real opportunity for people to switch off and have time to think, talk, create and engage. Choose your location based around this thinking – get back to the ocean or nature spots. Think about the use of space and where you will stay. The creativity starts the moment you arrive.

Close the laptops and bring out large sheets of paper. The cognitive connection to thinking and writing is incredible – it allows a flow and a dynamism that cannot often be captured by tapping away at a keypad.

Bring your team back to basics by making idea generation and problem-solving larger than life on big sheets of paper that hold opportunities, as well as a page for concerns and challenges. Bring it out into the open, and tackle each area with transparency and shared purpose.

Allow the conversation to continue over dinner or lunch, and be open to the idea that an agenda can flow when people are given the opportunity to open up and share ideas without a stopwatch. Take notes at lunch or dinner – and add those to the ones from the more official creative brainstorming sessions. Carry this through and identify how you will share these ideas when back in the office.

back to the office as well.

Create tangible milestones for KPIs and performance during the retreat that you all agree to continue in the office. Most of all, if you’re going to take away your findings and apply agreed-upon accountability measures, make them official, and show that ideas generated on retreat can be swiftly implemented back at work.

Corporate retreats are back in vogue – and rightly so, for they can provide a crucial, authentic timeout for leaders and key teams to reconnect, assess productivity and build shared purpose at even the most challenging times Leadership

Performance Part of the purpose of a retreat is to help recharge mental and physical batteries, not deplete them any further. Integrate a yoga or fresh-air session in the morning with a mid-afternoon session outdoors or doing something that gets people moving. Engage in earlier drinks before choosing healthy, inspiring dinners at venues that understand delicious, fresh, high-quality ingredients.

Encourage ‘homework’ or calibration time in the evenings, and embrace the value of sleep.

View the retreat as time to share the value of bringing personal and business vitality to life and how this can be integrated seamlessly back at the office. Bring in speakers and facilitators who understand the importance of both personal and business acumen – it can make a world of difference in teaching your leadership team how to take all areas up to the next level.

If you’re the CEO or the leader of this retreat, then set the scene upfront. Time out in strategy sessions, combined with fresh air, fresh food and a fresh perspective, can create an incredible shift in old-style, work-hardplay-hard thinking. Bring balance into the day, and watch this philosophy find its way

ethic inside a company – it’s essential for our increasingly virtual world. This all greatly improves productivity and accountability.

Finally, whatever you do, keep it relevant and efficient, and forget about the fad gadgets and gimmicks or signature flashlights and backpacks. The best place to spend your budget is on the right location and the people hosting the retreat for you.

I always say there are three pillars of true leadership: • leading from within • leading by example • leading others Corporate retreats are an ideal opportunity for executive teams to test elements and roll them out for a period of time before sharing with the broader teams. It may be a fourweek implementation period post-retreat that requires a regroup before rolling out. By leading by example and practicing what you preach, the element of authenticity and trust is improved, creating a real engagement with leaders across divisions as well.

Often retreats are an opportunity to see other skills, characteristics and ideas from those around you – a forum where problem-solving and collaboration can show leadership in a different light. Most important, leadership teams and executivelevel management have an opportunity to explore the core commercial elements on the agenda, as well as their own personal wellbeing and goals, in a safe and constructive environment.

Increasing personal connection can greatly improve the collaboration and work

You don’t want your leadership team coming back into the office on Monday, exhausted from late nights of too many drinks and not too sure about what the next steps are. This is about lifting your corporate sessions up a notch and getting engagement from the get-go. It’s the conversation, the quality connections, and well-organized time and content that allow a perfect blend of relaxation, connection and strategic thinking. Corporate retreats, if executed well, efficiently and with purpose, are a powerful tool to reignite shared purpose, engagement and a passion for performance in business and in life.

Run your retreats like you do your business. Have a purpose, and define who needs to be there and what value you want in return. At the end of the day, building a culture that is healthy, wealthy and wise is the winning trifecta, and corporate retreats are an ideal place to benchmark those three elements together.

Nikki Fogden-Moore specializes in coaching high achievers to bring business and personal vitality to life. Her new book, VITALITY, is available internationally.

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FEATURES

PRODUCTIVITY

Why monotasking is the new black

Forget multitasking – we need to narrow our focus to become more efficient and stay mentally fit, according to brain expert Dr. Jenny Brockis

SURVIVING IN the crazy, busy modern workplace has resulted in our adoption of some new strategies designed to save us time. The problem is that no one appears to have done the necessary checks to see that these actually work. The one strategy most widely adopted has turned out to be the worst performance-enhancing strategy ever, because it requires us to use our brain in ways it wasn’t designed for.

Yes, multitasking is the biggest new brain myth on the block. It’s time to get rid of it and replace it with a far more efficient method of getting more done – monotasking.

Multitasking is trying to focus on more than one thing at a time. Sure, you can drink a coffee while walking along and talking to a colleague, crossing the road and taking a selfie, but you‘re not paying focused attention to any one of those things, including your colleague.

One of the reasons multitasking has become so pervasive is because everyone’s doing it, and ticking off items on our to-do lists makes us feel good – which adds to the delusion. We know using our mobile phones while driving is dangerous, yet more than 70% of us admit to doing it. We ignore the risk because multitasking has become the ‘norm’; it’s considered a basic work requirement.

We even post job listings that say that multitasking skills are desired.

Multitasking fragments our attention – a quick email response here, a two-minute conversation there. We skim information and only grab the headlines. The outcome?

The cognitive cost includes poorer memory, mental fatigue, and reduced efficiency, effectiveness– and innovation. We make more mistakes, and we miss opportunities.

Overall, multitasking puts us at increased risk of burnout, damaged relationships and

WHY MULTITASKING FAILS When we attempt to multitask, our obliging brain attempts to help by giving one task to each hemisphere. The trouble is, the brain can still only pay attention to one at a time, so the brain task switches very, very fast, giving us the illusion that we are paying attention to two things simultaneously. This can be made more obvious when we look at optical illusions.

What do you see in this picture, a native chief or an Inuit?

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poorer performance; it’s hardly the time- and energy-saving solution we thought it would be.

What’s going on in the brain when we multitask?

One of our brain’s primary functions is to keep us safe; we scan our environment every one-fifth of a second on the lookout for changes.

The brain loves patterns and things that are familiar, because the implication is that this is a safe place. Our selective focus has developed so we pay attention to what is most important to us at any given moment while being alert to other things happening on the periphery.

When we direct our focused attention, we use part of our prefrontal cortex, the highly specialized part of our frontal lobes used for higher-order executive thoughts such as planning, organizing and regulating emotion.

This area has what can only be considered a couple of design flaws: It’s small, highly demanding of energy and can only handle a small amount of information at any one time. That’s why the number of thoughts we can hold ‘front of mind’ at any given time is around seven. As the ideas get more complex, the space available reduces. When it comes to focused attention, there is only room for one.

Multitasking is the one brain function that the more we practice, the worse we get. It has been shown that chronic media multitaskers fragment their attention so much that they perform worse even when trying to monotask.

It has been estimated that multitasking causes us to make up to 50% more mistakes and take 50% longer to complete our work, equivalent to roughly a 25% drop in

individual productivity over the course of the day. An innocuous two-minute interruption can translate into 24 minutes before you get back to where you were before your train of thought was broken. No wonder some days we can feel we’ve gotten nothing done, yet are exhausted.

Multitasking in an organization reduces performance further – for example, when we are kept waiting for a piece of work by a multitasking colleague or need a decision to be made to move forward on a new project, so we end up starting something else.

We cannot multitask even if we are young, if we are female, if we are Clark Kent or if we like wearing our underpants over our trousers. Multitasking is multi-failing unless you happen to be one of the 2% on the planet who are supertaskers and whose performance gets better the more they multitask. (If you haven’t undergone the cognitive tests to prove it, your belief in your ability to multitask is most likely delusional – research has shown that those who believe they are really good at multitasking perform the worst overall.)

The way to get rid of multitasking is to stop doing it. But just like giving up any habit, such as smoking, it’s not always easy, especially if we are under pressure; the temptation for

the brain is to default to the survival route it thinks works best. Here are four ways to move away from multitasking:

1

Introduce monotasking into the workplace

While we can all try to limit our multitasking tendencies individually, the need is to reduce organizational multitasking, which has to come from the top. Making monotasking the preferred way of doing things gives everyone permission to follow suit.

2

Prioritize your priorities

3

Communicate your priorities

Take 10 minutes at the end of the working day to determine your top three most important and urgent tasks for the next day, and list them in order of priority. Shove everything else into a holding pen – those items can wait. The next day, start on your top priority first and don’t move to the second item until the first is completed.

In the office, make sure everyone is on the same page and knows which priorities have been agreed on so that there is no temptation to start on something else. This will boost completion rates.

4

Practice monotasking

Choose one activity, close the office door, switch your phone to silent, avoid all interruptions and work on just that one activity for a specified amount of time.

Monotasking leads to more work being completed more quickly and to a higher standard. Completing our work well feels rewarding, resulting in the brain secreting more dopamine, making us feel good and motivating us to repeat that rewarding activity. Emotions are contagious, so when we are feeling good, others will too, and the working atmosphere becomes more positive and vibrant. Being in a more positive mood opens our mind to more innovative and creative thinking – making it easier to solve more problems and make good decisions.

Working with our brain in the way it was intended is not just a better way of working; it also leads toward creating a high-performance workplace.

Dr. Jenny Brockis is a medical practitioner, specialist in the science of high-performance thinking and author of Future Brain: The 12 Keys to Create Your High-Performance Brain.

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PEOPLE

CAREER PATH

ECONOMIC POLICY

After retiring from the top job at TD Bank, Ed Clark has returned to his government roots as an advisor to Ontario Premier Kathleen Wynne 2015

HELPS REDUCE BUDGET DEFICIT The 2015 spring budget deficit reached $8.5 billion, but thanks to advice from Clark – who masterminded the privatization of Hydro One – this year’s deficit is expected to come in under $5 billion

2010

IS APPOINTED TO ORDER OF CANADA During his tenure at TD Bank, Clark was appointed to the Order of Canada in recognition of his “contributions to Canada’s banking and financial industry, and for his voluntary and philanthropic endeavours.” He also received Egale’s Leadership Award in honour of his support of LGBT issues

2014

BECOMES AN ADVISOR TO THE PREMIER Clark retired from his role at the bank in late 2014, but he wasn’t out of a job for long – in June 2015, Ontario Premier Kathleen Wayne tapped him to lead the Premier’s Advisory Council on Government Assets, where he helps shape economic policy for the province

2002

TAKES THE REINS OF TD BANK GROUP After serving as TD Bank’s president and COO, Clark ascended to the top job of CEO. Even as a well-paid executive, Clark spoke out about income inequality and made a point of donating a large portion of his salary to charity

“The people who have been the beneficiaries of this significant shift in wealth and income have to seriously look at themselves and say, ‘Am I doing enough?’”

1991

HEADS TO CANADA TRUST Although Clark has referred to his stint with Financial Trustco as one of his worst career moves, there was a silver lining. The failing company was eventually acquired

by Canada Trust, which later merged with TD Bank – an integration successfully helmed by Clark Ed Clark began his career in the federal government, holding a number of senior positions from 1974 to 1984. Most notably, he was involved in the development of the contentious National Energy Program

1985 MOVES TO PRIVATE SECTOR

1974

Clark surprised many when he left government work behind to join Merrill Lynch in 1985. He quickly excelled in the private sector, and was appointed chairman and CEO of Morgan Financial Corporation three years later, where he was tasked with righting the sinking ship of Morgan subsidiary Financial Trustco

GETS INVOLVED IN GOVERNMENT

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PEOPLE

OTHER LIFE

FACING THE MUSIC Michael Connon’s love of music took him into the financial industry, but he’s since come full circle

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

BEING IN a band doesn’t always lead to a successful career in finance – hardly ever, in fact – but in Michael Connon’s case, it did just that.

Connon has been playing the guitar since he was a teenager. In the early ’90s, he found himself running a bar, where he met a regular customer who owned a financial company.

“One day he handed me his card and said to come see [him],” says Connon, who holds a degree in applied

90,000

mathematics. “I started there in 1993.”

He’s since built a great business in the field, but he recently returned to his musical roots: Last year, his band won a gig playing a charity function at Toronto’s Hard Rock Café.

“When you play in a band, you can only think about playing,” Connon says.

“You can’t worry about work; you get really into the music, and your mind shuts down. If you have a high-pressure job, all your worries go away.”

The number of guitar strings the Fender factory manufactures daily

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1,023

The weight, in kilograms, of the world’s largest guitar

1931

The year the first electric guitar was manufactured

Adapt or die?

Why advisors should consider branching out

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CONTENTS 49 Market wrap

The latest news from the life and health insurance marketplace

MARKET WRAP

Q&A

Are workplace wellness plans worth it?

Mark Tisdale, director of wellness, McFadden Benefits & Pension

52 News analysis

The wealth management industry has moved toward holistic advicegiving, and life insurance could soon follow suit

54 Industry icon

First York Insurance’s Ted Polci explains how a near-death experience helped clarify his role as an insurance advisor

56 Cover story: Life and health insurance trends Experts weigh in on the emerging trends that should be on every advisor’s radar

61 Specialty risk specialists

Being able to insure high-end risks is all a matter of having the right partner

Years in the industry: 18 Career highlight: Being introduced as wellness director at the McFadden Benefits XPO on January 29, 2016

In your opinion, do wellness programs really save employers money on healthcare costs?

Strategic and targeted wellness programs not only save money, but they also strengthen the organization as a whole. They’ve been shown to reduce healthcare costs. However, their impact is much more significant when you consider the impact to business operations and productivity. Most of the results are situational and case-specific, so they are not widely shared. There’s no question that some programs do not save money. Simply offering a benefit to employees or making resources available doesn’t typically promote change. A proactive approach is needed.

Can they produce measurable benefits for employee health?

Workplaces have a unique opportunity to affect the social environment and create one that supports healthy behaviours, which in turn deliver health benefits.

For example, focusing on psychological safety can help to identify and break down barriers that would otherwise go unaddressed. Measuring the 13 psychosocial factors that impact employees’ work experience can raise questions and promote discussion that leads to real organizational change.

Do they unfairly punish people who are unable to participate?

Some ill-conceived wellness programs have alienated those who might benefit the most from making positive lifestyle changes.

Making programs accessible is important, and having many options available is helpful.

For example, a ‘bike at work’ program is widely accessible and provides a fun way to get active, but a vending machine stocked with superfoods can be accessible to everyone.

Are these programs just a ploy to shift medical costs to unhealthy employees?

The cynics and critics might think so, but while everyone has ultimate responsibility for their own health and behaviour, we can help to motivate each other to move more, eat better and manage our emotions. There is strength in numbers, and a good wellness program leverages healthy people to help those less fortunate. Organizations are well-positioned to make good choices easier and help employees steer clear of health hazards.

What could be done to improve current programs?

Better planning, organization, tools and management. Many business and management principles can be applied to the implementation of a solid wellness program.

Companies can leverage their internal resources, create committees, teams, and competitions, and make it fun.

Overall, do you believe we should persevere with employer-sponsored wellness programs?

Absolutely! And we need to do a better job of sharing our experiences and learning from them.

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MARKET WRAP

NEWS BRIEFS - HEALTH Quebec says no to marijuana Quebec will not be forced into setting up a distribution network for marijuana.

The province’s finance minister, Carlos Leitao, says Ottawa can’t push his province into action when pot is made legal. His comments came after Prime Minister Justin Trudeau revealed he wants to work closely with authorities in different regions, speculating that marijuana may be sold from government-run liquor stores. Leitao did not hold back in his displeasure about the plans, commenting that he had “no plan, no idea, no intention of commercializing marijuana.”

Billionaire lashes out at drug-maker Billionaire Charles Munger didn’t hold back in his criticism of Valeant Pharmaceuticals International at the annual meeting of his Daily Journal Corporation in Los Angeles. Last year, the drug-maker, which has manufacturing facilities in Canada, was accused of turning to a mail-order pharmacy in order to increase its sales.

Since then, lawmakers have examined how the firm sets its medication prices.

“I couldn’t resist calling attention to it,” Munger said. “These crazy false values and this crazy excess [are] bad morals and bad policy.”

Fastest-rising dental costs revealed In need of a filling or two? Then you might want to steer clear of Alberta. A 10-year assessment of increases in dental costs by the Canadian Life and Health Insurance Association [CLHIA] has revealed the province as the most expensive place in the country to maintain a healthy smile. Dental costs in Alberta have risen 56% over the course of a decade, or an average of 5.6% per year. According CLHIA’s Joan Weir, that’s more than double the growth in other provinces – on average, costs in BC increased 2.6% per year, while costs in Ontario rose 2.4% per year.

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Partnership boosts benefits for Canadian expats A new life insurance offering provides peace of mind to those living abroad The number of Canadians living abroad has risen rapidly over the last decade, and a new partnership aims to make sure they get all of the insurance benefits they deserve.

The Empire Life Insurance Company has teamed up with MetLife Expatriate Benefits to administer its new Voyageur Global Benefits program for expatriate medical, disability and life insurance.

Recent reports estimate that 2.8 million Canadians are living abroad – to put that in context, if they all lived in the same place in Canada, they would collectively make up the fourth largest province in the country.

Voyageur Global Benefits aims to offer world-class benefits for Canadians working abroad, bringing them local expertise no matter where they are living. A key feature of

the new suite of benefits is the MetLife Regional Service Centre model. Located in key areas around the world, the Regional Service Centres put local resources closer to members who live abroad. Experienced staff will provide local expertise and understanding of regional differences, making it easier to obtain quality medical care, get claims paid and receive local support.

“Working abroad can be both exciting and challenging for expatriates and their families,” says Dan DeKeizer, senior vice president of global employee benefits at MetLife. “With Voyageur Global Benefits, customers will have access to more than a million healthcare providers in over 180 countries, which helps deliver peace of mind no matter where they are in the world.”

“Customers will have access to more than a million healthcare providers in over 180 countries” Private drug plans “better and faster” Private-sector drug plans are “better and faster” than government-run drug programs. That’s the verdict of a new study published by the Canadian Health Policy Institute [CHPI], which comes at a time when many, including Ontario’s minister of health, are advocating for Pharmacare, a new government-run plan. Taking data from IMS Health Canada, the study revealed that of the 464 new drugs that were approved for sale from 2004 to 2012, just 231 were made available on public plans, compared to 413 that were made available on at least one private plan.

No coverage for Zika cancellations Insurers may not have to make payouts to policyholders who voluntarily cancel travel plans due to the Zika virus, according to reports. That’s because health officials have stated they cannot yet prove a direct link between the Zika virus and brain deformities in babies. During the last five months, 4,000 babies in Brazil have been born with microcephaly, which leaves babies with unusually small heads due to abnormal brain development.

The condition has been linked to the Zika virus, which is transmitted by mosquitoes.

Market gains boost Great-West Life’s position The life insurer is now the largest in Canada thanks to healthy stock growth Manulife is no longer the leading life insurance company in Canada after a remarkable day of stock-market gains saw it lose its place to Great-West Life.

On February 15, Canadian lenders enjoyed a remarkable fight back after having been hit heavily during this ongoing period of market volatility. In their highest climbs since November 2011, RBC leapt up 3%, while TD Bank enjoyed gains of 1.8%.

However, it was the rise of Great-West Life that proved particularly monumental. The firm rocketed up 2.9%, its biggest gain since November of last year. In doing so, it was able to displace Manulife as the largest life insurance company in Canada based on market value.

The remarkable day of market movements also saw stocks surge in the healthcare sector, peaking at 5% across all spheres. Valeant Pharmaceuticals gained 6.33%, while Concordia Health Corporation enjoyed a 2.8% rise.

NB man gets prison time for fraud A New Brunswick man was sentenced to nine months in jail after he admitted to committing life insurance fraud.

Stephane Valcourt’s sentence includes an additional two-year probation period, after pleading guilty to charges of both forgery and fraud that related back to incidents beginning in 2012.

Prosecutors said that between January 2012 and December 2014, Valcourt managed to defraud 10 victims by convincing them to sign up for supposed life insurance policies, only to keep the payments they made on their premiums.

There were also movements among Canadian energy companies, which benefited from a recovery in the price of oil. Both Enerplus Corporation and Penn West Petroleum were able to reel in growth of more than 6%, while producers as a whole enjoyed an overall gain of 2.8%.

Great-West Life rocketed up 2.9%, its biggest gain since November of last year. In doing so, it was able to displace Manulife as the largest life insurance company in Canada ...

Manulife strikes fitness deal Manulife is looking to gain more business by bringing financial incentives and fitness trackers into Canada. The insurance giant’s exclusive agreement with Vitality Group will allow Canadian policyholders to enjoy savings on their life insurance by using fitness trackers to prove they are attempting to boost their health. Available lifestyle options that can help reduce premiums include receiving cancer screenings and vaccinations. This form of insurance was launched in the US last year by Manulife’s subsidiary, John Hancock Financial Services.

NEWS BRIEFS - LIFE Foresters buys asset management firm Perhaps best known for its life insurance products, Foresters has made a significant acquisition as it moves into the asset management area. The company has entered an agreement to secure 100% of the shares of Aegon Fund Management [AFM] and Aegon Capital Management [ACM]. “We see strong synergies between our Canadian life and annuity products and services and AFM’s product offerings in the retail space through their imaxx mutual funds,” said Foresters president and CEO Tony Garcia. “On the institutional side of the business, we see substantial growth opportunities for us, given ACM’s solid track record in this space.”

Ottawa retirees left without insurance Retired Ottawa city workers are furious after being left without insurance following a switch to a new company. Retirees who moved from Manulife to Great-West Life claim they were left to pay for hospital services and prescriptions after many of their names were accidentally removed from the system during the switch. “This is a real black eye on the city,” one of the affected retirees, former Ottawa city clerk Pierre Page, told the Ottawa Sun. “They should be ashamed.”

Insurer plans major expansion Desjardins Group has set its sights on expanding beyond the borders of Quebec following its purchase of the Canadian arm of State Farm Life Insurance. According to the company’s CEO, Monique Leroux, Desjardins is establishing a strong insurance operation and an encouraging financial position with the goal of expanding within three to five years. Last year, the company had $250 billion in assets after buying State Farm Life Insurance, and now suggests revenues outside the province could reach 40% instead of the existing 35%.

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IN DEPTH

Death of the lone ranger?

An industry-wide shift toward holistic advice could mean the end of advisors who focus solely on life insurance

THE WILD WEST is a thing of the past for the lone ranger insurance advisor.

“For the lone ranger who just does life insurance, that’s not working anymore,” says Wade Baldwin, an advisor at Sun Life.

“They’re going to be left in the dust for sure.

I truly think that if you are not doing a holistic ‘life, health and wealth’ approach to your practice, you are doing a disservice to your client. There’s a difference between being a true professional and someone who is just flogging life insurance.”

It’s a trend that closely mirrors what’s going on with life insurance carriers.

Recognizing that insurance sales are stagnating and not pulling in the necessary profits, life insurers are venturing into the wealth management space.

“I think advice leads that model,” says Melissa Harrell, associate advisor at Howe Harrell & Associates. “It is in the client’s best interest to work with an advisor who

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can provide various insurance and investment products. It’s just good business practice to have all our clients’ needs in one spot. Walmart was wise to branch into fresh groceries, and [they] acquired new sales through existing customers. Insurers are getting competitive with their service offerings to stay current and provide new

management space, aiming to counter the tough economic and regulatory environment threatening insurance.

Life insurance advisors are starting to make the same moves as well, albeit for slightly different reasons.

“Especially now with the changes coming in with commissions disclosure, and the

“There’s a difference between being a true professional and someone who is just flogging life insurance” Wade Baldwin, Sun Life solutions to clients.”

Over the least year especially, have been several acquisitions of wealth management firms by Canada’s leading life insurance carriers. Manulife, Sun Life and Great-West Life have all ventured into the wealth

possibility of banning commission in the future, you have to be a professional,” Baldwin says. “What’s going to set you apart from that other guy down the street who’s just selling life insurance? To be a true professional, you need to be a holistic

HOLISTIC MODEL

DISABILITY INSURANCE LIFE INSURANCE TAX PLANNING ADVISOR

ESTATE PLANNING INVESTMENT DECISIONS

planner – someone who actually does all areas of life, health and wealth.”

Advisors who want to continue to specialize in life insurance only should consider becoming part of a wealth management firm that offers holistic service, Harrell suggests. Within that structure, the need for people who specialize in insurance is invaluable.

“I did it myself with the nation’s top wealth management firm,” she says.

“Whether it is term insurance or permanent insurance for tax-exempt savings purposes, there is a need for insurance, and therefore the need for educated and specialized advisors who deliver this service.”

However, insurance advisors still need to be a part of the bigger picture, she adds.

“I think insurance agents need to play more of an integrated role in financial planning for a client and less of a transactional role. The successful firms understand this, and have been employing this strategy for years.”

On the independent side, advisors who specialize only in life insurance or disability and critical illness insurance should consider joining a network. “[Then] the full need of the client is taken care of,” Baldwin says. “Good friends of mine, all they really want to talk about is life insurance, but when it comes to disability, long-term care or mutual funds, then they have other team members that they pull in, and they work as a network. The money guy just does money, and when he runs into a need for insurance planning, they’ll bring in their specialist. That model works as well.”

While CRM2 may have been a deterrent for some advisors looking to enter the wealth management space, Harrell and many other planners see it as a good thing.

“CRM2 is very common-sense practices,” Harrell says. “To anyone entering into investment management, the compliance side of things is just part of the process and a learning curve. I think the industry joke is that while insurance advisors don’t have to deal with compliance headaches, they do have to deal with underwriting headaches, so we all get our bumps in the end.”

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SPOTLIGHT

The importance of life A near-death experience during an earthquake in Costa Rica led to a life insurance epiphany for Ted Polci

TED POLCI thought he was going to die.

Suspended 75 feet over the Costa Rican jungle, his bungalow started shaking violently in the dead of night. He managed to escape onto terra firma, where he realized he was in the middle of an earthquake – in fact, he was five kilometres away from the epicentre, which reached 6.4 on the Richter scale.

“It felt like the side of the cliff was going to come loose and slide down into the Pacific below,” he recalls. “I would have given anything right then for someone who had been through this kind of thing before and knew what was happening to come along, take me by the arm and tell me that if I took his advice on what to do, everything would turn out all right.”

It was an epiphany of sorts for Polci, a partner at First York Insurance.

“That’s what my clients want,” he says. “They don’t always know they want it at the time, but when they are facing life-altering business and personal decisions, when they are dealing with family and business matters that are confounding to them, they do appreciate the experience and even the wisdom we can bring.

If something happens, clients know I’ll be there the next day, the next month or next year to make sure they have the best possible outcomes.”

Polci never intended to be an insurance advisor. After graduating from Ryerson University, he planned to continue his education at the University of Michigan.

“The summer job I needed to do well at to finance my education kind of fell apart midway through the summer, so I came back to Toronto with no job prospects,” he says.

In the spring before graduation, London Life

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was offering $50 in expense money to go to London for an interview. Polci took them up on it. “I used that money to pay my rent, and that was the only reason why I went,” he says. “I was curious, but I fully intended to go to Michigan.”

But in mid-summer, with no other job prospects and no money, “I called them and asked if the job offer was still open. They said yes. I said, ‘I’m only coming for a year. I’m going to save my money and going back to school.’”

But Polci never went to Michigan.

“I came into the business and I loved it,” he

expenses, but not income.

Nearly five decades later, that model is still working. Polci’s thriving practice serves around 100 clients, most of whom are ultra-high net worth. While many advisors might think of them as the ideal clients, the demographic brings its own set of problems.

“Everyone is busy – this is a challenge no matter how big the client,” Polci says. “We have trouble understanding why people aren’t upset about some issue we bring to their attention.

But for them, they’re doing what I do in my

“If something happens, clients know I’ll be there the next day, the next month or next year to make sure they have the best possible outcomes” says. “It was tough, but I loved every minute of it. I called; people said no. Some people were really rude, but it didn’t bother me. I really felt like I was doing good work for people. “ In the mid-’80s, in the midst of the big push into financial planning in the US, Polci and his partner, Ted Warburton, put together a prospectus for a financial planning company.

They found an interested party in a major life company, and the pair started First York Insurance – but by the end of the third year, they were barely breaking even.

“We were partners in our life insurance practices, but we found – as most agents find – that it’s very tough to have a partner in the life insurance business,” Polci says.

So they decided to dissolve the partnership and produce solely for their own accounts within First York Insurance Agency – sharing

business and you do in your business. They’re working on the problems that are most dangerous to them today. Our skill is in getting their attention and helping them to focus on solving this issue that could destroy all of the hard work and success they have had in the last 30 or so years.”

After almost 50 years in the business, Polci has definitely learned the virtue of patience ¬– both when advising clients and when building a successful practice.

“At the outset, you have to survive,” he says.

“Build a base and grow it, and do whatever it takes to keep growing and evolving as a businessperson. After you’re established, you can start to specialize. I had no interest in investments or financial planning. I sell life insurance to high-net-worth business owners, and I love it.”

FACTFILE Name: Ted Polci Company: First York Insurance Title: Partner Years in the industry: 48 Specialties: Estate planning and insurance

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COVER STORY

2016 Life and Health Insurance Trends The insurance industry is adjusting to a period of massive change.

From low interest rates to increasing disability claims but decreasing payouts, here are 20 trends to keep an eye on for 2016 Life Insurance

Group Benefits

Living Benefits

01 UNDERSERVED MIDDLE MARKET A dwindling number of advisors is leading to underserved segment of the population.

“What we’re seeing right now, especially in the middle market, is that people have less chance to meet advisors to help them make the right choice,” says Steven Ross, president and chief operating officer at La Capitale. “There are fewer advisors than there were 30 or 40 years ago. There were a lot more career agents selling insurance in Canada meeting the middle market. The middle market in Canada right now is underserved.”

While many insurers are turning to simplified-issue insurance, the advisors who remain in the industry will be a big part of the solution.

“We need to partner with our advisors on simplified products,” Ross says. “There

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are so many products out there; I still believe that to make the right choice, you need to sit down with an advisor.”

02 LONG-TERM PRESSURE The low-interest-rate environment is starting to make its presence known.

“The premiums for long-term lifetime products have increased 30% to 45% over the last six years because of the drastic reduction in long-term interest rates,” Ross says. “It’s made products much more expensive.”

New accounting rules for life insurance companies are exacerbating the pressure.

Canada is one of the few countries (along with the US, Japan and Australia) that offers products with guaranteed death

benefits and guaranteed premium for the duration.

Ross believes that pressure will lead to carriers taking less long-term risk with products over the next five to 10 years.

“You’ll see fewer of them, and if you see them, the price will be much higher,” he says. “There will be much more shared risk between the policyholder and the insurance company in terms of long-term products. And you’ll see a lot more simple products, fewer questions, simple underwriting and guaranteed issue.”

03 MORE WEALTH MANAGEMENT PRODUCTS Insurers are also going to be developing their wealth offerings.

at higher rates, that’s not always the case.

“Now you have fewer kids, but you’ve got more assets, and you’ve got a lot of people growing old with a lot of assets that are going to pay a lot of income taxes at death,” Ross says. “That changes the needs a bit and the products that you sell. But then again, if you’re a grandparent and you want to leave money to your to your kids or grandchild at your death, the most profitable way in Canada is still life insurance.”

05 CHANGING CLIENT INTERACTIONS

“We have seen and continue to see life insurance companies become more active in wealth management and investment products,” Ross says. “The only companies that can really give you an income for life are life insurance companies, because of annuities and lifetime annuities, and you need to be an insurance company to do that. So I think the investment and ‘income for life’ portion of the market will grow.”

04 SHIFTING DEMOGRAPHICS Family dynamics have changed dramatically over the last 30 or 40 years.

In the past, life insurance was there to protect your family and children if you died, but now that people are living longer, having fewer children and getting divorced

Despite changes in demographics and the industry in general, one principal tenet of life insurance remains the same: It still, for the most part, needs to be sold, not bought.

“It’s not like car and home insurance,” Ross says. “You can have an application online that will help you understand your need, help you choose your product. But in the end, when it comes time to buy your product, most people, if not all, still need to talk to a specialist.”

But in the future, the way advisors speak with clients is likely to change – especially if they want to remain relevant to a younger generation.

“In the future, that talk with a specialist

06 ESCALATING DRUG COSTS Medical breakthroughs are coming at a cost to group benefit plans. More and more biologic drugs are being developed – there are currently 200 to 300 pending patents – but they are much more expensive than their predecessors. For example, one drug that treats rheumatoid arthritis costs between $40,000 and $60,000 per year for one patient. When multiple people are on the drug, it adds up quickly.

“It’s affecting the cost and eventually the stop loss,” says Serge Gingras, vice president of EBI Group. “Employers used to be on the hook for $5,000, then it went up to $7,500, then $10,000, and now the common cost seems to be $15,000 of stop loss. And the cost of that stop loss is ever increasing, even though the insurers have taken steps to try to kind of average those costs. The future is not looking very good from a cost standpoint.”

07 PHARMACY MANAGEMENT To combat rising drug costs, pharmacy management plans are gaining a lot of traction in the industry.

“As a first defence, a lot of pharmacy management has to be introduced to make

“The premiums for long-term lifetime products have increased 30% to 45% over the last six years because of the drastic reduction in longterm interest rates. It’s made products much more expensive” Steven Ross, La Capitale could be on the web,” Ross says. “[You might] have your first interview via webcam instead of meeting them physically just to give an overview of the services you can offer. The younger generations need things to go quickly, and then they might want to sit down if there are steps that have been done before.”

sure the drugs are actually needed,” Gingras says. “We need to have some approval mechanisms to make sure that’s the drug that’s going to work. There might be other substitutions that can work just as effectively that are less expensive. It’s been a huge factor over the last few years, and it’s going to increase over time.”

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DEDUCTIBLES Despite the pressure on group benefit plans, employers and advisors alike don’t want to subtract from plans, seeing them as a key way to attract and retain employees. As a solution, Gingras says, many benefits providers are taking a new approach to deductibles.

“Eighty per cent or more of the claims are of the small, frequent nature, so having a larger amount of self-insurance upfront may make some sense for some employers,” he says. “You have to do cost comparisons, but we’ve been successful in introducing some of those types of strategies where there is more self-insurance, therefore cutting the cost of the actual insurance down substantially.”

09 TRAINING EMPLOYEES To help keep claims from spiralling out of control, advisors and employers are looking for outside help to promote prevention.

“We’ve used the disability management companies or rehab companies as a third party to help employers train their leaders and supervisors to look for employees who might be having some difficulties to prevent claims from happening in the first place,” Gingras says. “If you can recognize an opportunity to help an employee immediately, [he or she] might take a week, two weeks or three weeks off as opposed to a year because you’ve done something as a practice measure.”

10 RISING MENTAL HEALTH CLAIMS “I would say the largest cause of potential short-term and long-term disability claims … is mental nervous disorders,” Gingras says.

Aside from all the social factors out there, Canadians are also feeling financial stress as their average debt burden continues to grow.

“A proactive management program to try to monitor those things would certainly be a successful program to introduce,” Gingras says.

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INCREASED GROUP LTD PREMIUMS Some groups have seen large increases in long-term disability premiums – as much as 35% over the past six months, according to Lawrence Geller, president of L.I. Geller Insurance. This, he says, is leading to many people opting out of coverage.

“Just in the past two months, we’ve started seeing more and more lawyers joining the big firms trying to opt out of benefits plans because of the premiums,” he says. “We’ve noticed that group insurance LTD premiums are starting to increase dramatically for older, more mature accounts. With group insurance, especially with large, relatively credible groups, there’s a portion of the expense that is attributed to premium and a portion that is attributed to the pool. The larger and more credible the firm, the greater the amount that’s attributed to the renewal premium.”

12 MORE CRITICAL ILLNESS COVERAGE More and more employers, however, are seeing the value of including critical illness insurance in their group plans, according to Gingras.

“We talk about it at every renewal meeting so the employer is aware that it’s available on a group basis,” he says. “The definitions are good, and the pricing is excellent, without having to go through the medicals. But you need a successful and profitable employer to be able to do that, because they’re all concerned about costs, and it becomes a taxable benefit to the employee. It becomes like life insurance, and therefore there must be a buy-in.”

13 WELLNESS PLANS There’s been much debate around the effectiveness of employer-sponsored wellness plans, but it appears they are here to stay.

“I think wellness plans can be effective;

they’re just hard to measure,” Gingras says.

“I think they can significantly improve the morale of the employees. There is a good feeling about working there. There should be some benefit at the end, and therefore fewer claims and less stress.”

14 INCREASING DISABILITY CLAIMS, FEWER PAYOUTS Disability claims seem to be on the rise lately – and Lawrence Geller of L.I. Geller Insurance believes the tough economic climate is to blame.

“For a couple of years, it was my sense that people were holding off on claiming

It is estimated that 40% of Canadian women and 45% of Canadian men will develop cancer in their lifetimes

insurance makes insurers reluctant to create new products, Geller says.

“Part of the problem with disability is that the claims liability can extend over a very long period of time,” he says. “With life, you die and they pay. With disability, the actuaries and claims adjudicators have to determine how long they think a claim is going to go on for, and this goes to experience.”

One of the few developments in this sector has been the Hunter McCorquodale/ Lloyd’s loss of future earnings product.

“Disability covers historical earnings, but what about these long-term expectations?” Geller says. “So Hunter or Lloyd’s says, ‘If you are disabled for a year, we’ll pay you a lump sum’ – it might be $1 to $5 million that you can stash in the bank to offset for future earnings. In my mind, that’s probably the biggest advance in the disability insurance world in the past 20 years.”

16 LOW TAKE-UP RATES FOR DISABILITY

on disabilities that they already had because they were able to generate more revenue in good times,” he says. “We knew people were starting to be treated, especially for mental/ nervous affective disorders, but we weren’t seeing the claims, and we couldn’t get them to submit claims.

All of a sudden, it’s becoming more difficult to generate revenue. With lawyers, I think we’ve seen more claims in the past six months that we have in the prior two years. It’s pent-up demand.”

However, the lower interest rates have hit insurers, too, and regulators are looking over carriers’ shoulders to make sure they have enough in their reserves to cover claims.

“What that means is some insurers are starting to become far more judicious in the payment of claims,” Geller says. “They start dragging their heels and making claimants jump through more and more hoops. We aren’t seeing it across the board with all insurers by any means, but we are seeing it with one or two.”

15 CLAIMS STIFLING DISABILITY INNOVATION While life and critical illness insurance have seen numerous recent product innovations, disability seems to have been forgotten. The very nature of disability

Disability insurance seems to be flying under both advisors’ and Canadians’ radars, even though plenty of people in today’s fluid job market could benefit from the portability of the coverage, EBI Group’s Serge Gingras points out. The problem, he says, is that many advisors aren’t being trained to sell what can be a rather complex product.

“It’s just one of those things that we don’t have the carriers’ infrastructure anymore to train advisors appropriately to talk about this,” Gingras says. “The difficulty in underwriting is making it easier to sell life coverage than both disability and CI. It’s an easier sell, but more difficult to sell in terms of the product itself. It’s a little bit more complicated – there are more definitions, there are more things to learn, and it’s not just black and white like life insurance would be, for instance. Obviously there are nuances on the life side as well. But on the disability side, it’s more about definitions.

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People want to know more about the product before they spend the money that’s required of them.”

17 CRITICAL ILLNESS A DIFFICULT SELL Critical illness sales are lagging behind life insurance sales, and Gingras believes stringent underwriting guidelines are at least partly to blame. Another obstacle, he says, is the cost.

“The average Canadian recognizes the need, but … the pricing has exceeded the expectation, so it’s difficult for the ordinary Canadian to justify the cost,” he says.

Even when clients do inquire about CI insurance, Geller observes, they’re often confused about what they need.

“We’ve noticed that people want to know about large amounts of critical illness, feeling that’s what they need,” he says. “But when they see the premiums, even for a 10-year term, they balk at them.”

He suggests getting rid of the extras that can be included on the product as a way to lower the cost.

“I’ve been suggesting to people that they should look at one year’s after-tax income for CI and deal with it like term insurance – forget about return of premium, and take off all the expensive riders.”

18 RETURN OF PREMIUM CATCH-22 To help combat CI pricing concerns, many Canadians like the idea of return of premium – but they may not be aware of the whole picture.

“The 50-year-old who will see all of his money back at age 65 may see that opportunity, but that doubles your premiums, so they’ll buy half the amount,” Gingras says.

“So it’s a catch-22. They’ll really need $200,000 or $150,000, and they’ll buy $100,000 or $75,000 to get the money back because the premium is extensive.”

Plus, adds Geller, “if you have a claim, you lose the return of premium. So you’re paying the insurer a higher premium for the

60

www.lifehealthpro.ca

There are approximately 200 to 300 patents currently pending for biologic drugs coverage if there’s a claim. One thing about a critical illness is the likelihood of a claim is very high over time. Almost everyone is likely to develop something at some point before they die.”

19

“It is limited, and there is a price to pay to get simplified issue,” he says. “I’ve sold some, but because of the conditions, sometimes you need to go through an underwriting process to get the best value for the dollar.”

20

SIMPLIFIED-ISSUE CI

ACCESS TO CARE

Gingras says he’s seeing insurers – especially the smaller ones – becoming more aggressive in the area of simplified-issue CI insurance.

Given the time constraints many consumers face today, the idea of simplified-issue CI is attractive for many.

“This makes it easier and easier, and that’s a good thing in today’s marketplace, especially when you’re talking to young people,” Gingras says. “Online applications seem to be a good trend for people being more aware and having the opportunity to buy it, whereas they wouldn’t have done it otherwise.”

There is a trade-off, however.

One sales strategy that Gingras has found successful in terms of CI is highlighting the quicker access to care it can afford clients – opportunities to access the Cleveland Clinic in Toronto, for example, or the second tier of healthcare in Canada.

“Canadians have a real concern about healthcare, so there’s a push towards having quicker access to care,” Gingras says. “I’ve sold a large amount of CI [to clients who can access] the US system so they don’t have to stay on a waiting list. We’ve successfully introduced this idea of immediate access to healthcare.”

SPECIAL PROMOTIONAL FEATURE

Specialty risk specialists When Canada’s major insurers can’t handle high-end cases, they call Hunter McCorquodale

a lower volume, larger risk, high premium, bespoke shop.”

Through a combination of appropriate pricing, creative plan design and expert underwriting, Hunter McCorquodale is able to offer solutions in many cases where regular insurers can’t or won’t. The firm’s areas of expertise include high-limit disability income for business and personal needs, life and disability applicants who are declined elsewhere due to medical history, lifestyle or foreign travel exposure, disability insurance

“Hunter McCorquodale can’t insure everybody, but we can insure perhaps half to threequarters of the cases that are declined by regular insurers” Ken Hunter, Hunter McCorquodale

WHEN INSURANCE needs get complicated, advisors sometimes need to call in specialist. In the difficult-to-insure high end of the market, that specialist is often Hunter McCorquodale, a leading developer, distributor and underwriter of special risk life, disability and personal accident insurance.

Such was the case when a corporation approached an advisor, asking for a $50 million life insurance policy on a key person in a company they had just acquired a major interest in. The application was submitted to a regular insurer, but during the process, the client told the advisor they also needed $50 million in key person disability coverage.

The advisor soon learned that no regular Canadian firm offers any significant amount of key person disability coverage and was referred to Hunter McCorquodale. “We put a $50 million key person disability policy in place through Lloyd’s,” says Ken Hunter,

managing director at Hunter McCorquodale.

“It was signed, sealed and delivered while the life application was still in underwriting.”

While this may be an extreme case that most advisors won’t often encounter, the fact is that major insurers are declining more and more life and disability insurance applications, for several reasons.

“One issue is that the industry has moved to a model where there’s a focus on getting cases through quickly, making decisions quickly, cutting your losses early and not spending a lot of time chasing after cases that don’t look promising,” Hunter says.

While there are many specialist firms that target the lower segment of the market, Hunter McCorquodale excels in insuring professionals, executives and business owners.

“We’re not a high-volume, low-premium, commodity type offering,” Hunter says. “We’re

for executives who lose their group LTD at age 65, and kidnap & ransom insurance.

In November 2015, Hunter McCorquodale launched Acceptional Life, an innovative new life insurance product that offers up to $10 million coverage to individuals despite medical and lifestyle impairments, including HIV. “Hunter McCorquodale can’t insure everybody, but we can insure perhaps half to three-quarters of the cases that are declined by regular insurers,” Hunter says.

Successful advisors who place their clients’ interests first appreciate the critical importance of seeking alternative solutions for the hard-to-insure. In this context, Hunter likes to talk about the four ‘R’s that come from taking this extra step: preserving relationships, strengthening reputation, increasing referrals and ultimately earning more revenue.

“If you’re an advisor,” Hunter says, “you have an obligation to at least find out if there’s an alternative for your client and to present it to them and let them decide.”

www.lifehealthpro.ca

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Considering Workers’ Compensation Practices:

Understanding and Overcoming the Challenges of Work at Home Accommodations

By Kevin Lamont, (Hons) B.A., M.A., C.R.M.

“My doctor says I cannot come into work today… I still need time to rest from my injury.” This is a message that frontline supervisors, operations managers, health and safety specialists, disability managers and human resource professionals, among others who handle workplace injuries, are familiar with.

A swift and healthy recovery is vital to the overall well-being of the injured party, enabling him/her to engage in their home life and workplace activities in a fashion comparable to their pre-injury state. The effective management of employee absences is essential to lessening the impact of employee absences on the employee and the employer. Return to work (RTW) and work at home accommodation programs are two plausible solutions.

From an employer’s standpoint, within the workers’ compensation system, employee absence can effect WSIB premiums and the potential for further financial surcharges in the form of claim experience rating plans. The WSIB proactively encourages employers to set-up RTW and stay at work (SAW) accommodations. Employers in Ontario also have a legal obligation from a human rights standpoint to accommodate disabled employees – subject to The Ontario Human Rights Code – as well as an obligation through the WSIB to identify and secure RTW or SAW opportunities. The proper implementation of such programs are key to their overall success.

For those employers who are actively trying to control workers’ compensation claims costs and to identify accommodation options, the solution to this lost time impasse may suddenly appear obvious. If an injured employee cannot come into work, why not provide the accommodation necessary for the work to be performed at home?

For more information: Contact us at info@crawco.ca or 1-800-522-1380.

www.crawfordandcompany.ca 201512E

Throughout this article we will review the challenges faced by employers when implementing a work from home accommodation and provide solutions to overcoming them.

Although work at home programs may be a good course of action, there are certain considerations that need to be addressed from a workers’ compensation standpoint before adopting an at home accommodation as a part of an organizations’s disability

management solution. Providing transitional duties at home means that the injured employee’s home becomes an authorized worksite. This can increase an employer’s exposure to further workers’ compensation injury claims at the employee’s home with an absence of proper risk and safety oversight, incident investigation, and capacity and supervision. Given that risk control measures cannot be fully implemented at an employee’s domicile, employees with work-related injuries who are already vulnerable to (re)injury are exposed to the risk of secondary injuries, which may be covered by the WSIB.

“Providing transitional duties at home means that the injured employee’s home becomes an authorized worksite.”

Furthermore, a July 2015 RIMS Executive Report on “Risk Management and Remote Work Policies,” explains more generally that with remote workers, “risk professionals and human resource executives face the challenge of determining whether a medical incident is a result of business activities and might require a workers’ compensation claim to be filed.” The line between personal activities and work activities becomes blurred and the work-relatedness of claims becomes harder to confirm. As Carolyn Snow, Director of Risk Management with Humana Inc., further illustrates in the RIMS report, “whenever you have a workers’ compensation claim without a witness – falling down stairs or slipping – it’s not unusual for those to be the more difficult claims.” As such, employers can become exposed to unverifiable (and even fraudulent) secondary injury, recurrence and aggravation claims. This can be particularly troublesome when dealing with concomitant absenteeism issues.

For employees performing transitional duties at home, it also becomes more difficult for supervisors to monitor an employee’s recovery, particularly where medical information has not been appropriately captured. Thus, it becomes more challenging to be able to provide appropriate and progressive transitional duty options and to identify where either medical or performance management interventions are required.

Indeed, in cases of at home accommodations, it becomes harder for employers to confirm whether modified work has been completed. This also exposes employers to retroactive lost time claims by employees, which are difficult to refute and can cost employers a significant amount in claims experience rating charges.

As it is difficult to confirm whether modified work is completed, there may be challenges in terms of accurate reporting to the WSIB. Employers rely on the WSIB to adjudicate their claims and the WSIB in turn relies on employers to provide accurate information to enable claim investigation. Inaccuracies in reporting – even those made in good faith – may prompt the WSIB to question the information provided on future claims.

For more information: Contact us at info@crawco.ca or 1-800-522-1380.

www.crawfordandcompany.ca

Lastly, based on the increased awareness and saliency of mental health issues within the workers’ compensation discourse, the psycho-social and emotional effects of an employee’s removal from the workplace for work at home accommodations must also be considered. Beyond these issues, from a workers’ compensation standpoint, employers should be cognizant of the broader legislative and regulatory context in which they operate when determining the appropriateness of work at home accommodations. For instance, the guiding principles of the “duty to accommodate” as set out by The Ontario Human Rights Commission, and as observed by the WSIB, includes respect for dignity and inclusiveness. Thus, an employee’s physical exclusion from their regular workplace and those accompanying social connections may be considered a violation of such human rights principles. Failure to accommodate a

“An RTW plan should be customized to gradually build the employee’s physical/mental tolerances regardless of where their work environment is.”

disabled employee at work should also be viewed within the scope of other legislation such as the Accessibility for Ontarians with Disabilities Act (AODA). Given this legislative and regulatory context, the risks of work at home accommodations from a legal standpoint must be carefully considered.

In recognition of the challenges of at home accommodation, what can employers do to mitigate lost time costs when they receive a message from an injured employee saying that they are unable to come into work? Here are few suggestions: •

•

•

• • • • • •

If an injured employee can work from home, consider what specific obstacles are preventing the employee from working at a regular worksite. How is the employee’s home different than their regular worksite? Working from home is an agreement made between the employer and employee. It is based on trust and commitment from both parties. An RTW plan should be customized to gradually build the employee’s physical/mental tolerances regardless of where their work environment is.

Consult with the injured employee to determine exactly what their RTW or SAW concerns are and discuss them with the employee, the WSIB and the attending healthcare professional to determine the validity of these concerns and to troubleshoot accordingly.

If the injured employee does not actively participate in RTW/SAW efforts, the employer should consider requesting intervention by the WSIB. Injured employees (along with employers) are required to cooperate in identifying and securing appropriate RTW/SAW opportunities.

If transportation to and from work is a barrier, consider carpooling options, public transit and taxi vouchers if economical.

Consider whether there are any non-injury related factors preventing the worker from RTW/SAW. Consult with other company departments and locations to determine whether a suitable accommodation is available elsewhere.

Obtain detailed medical updates to ensure complete functional abilities information can be considered.

Remain aware of the “hurt” vs. “harm” principle: RTW/SAW accommodations may “hurt” but they should not “harm.”

If the WSIB overrules a suitable accommodation offer, request an explanation.

In cases where at home accommodation remains the most viable option, the following strategies may be considered to mitigate the associated risks: • • •

Have the injured employee record the completion of work tasks in a daily log book and note any challenges they may be facing with RTW/SAW. Consider requesting a WSIB directed “work hardening” program to run concurrently with RTW/SAW to avoid inertia and to promote rehabilitation.

Where appropriate and medically justified, consider an RTW onsite for limited hours in conjunction with at home accommodation to maintain the employee’s ongoing connection to the workplace.

When considering any accommodation option, The Ontario Human Rights Commission advises that “(e)ach person’s needs are unique and must be considered afresh when an accommodation request is made.” While having a roster of go-to accommodation options and comprehensive accommodation policies can be useful, each employee is unique and warrants due consideration with regards to their accommodation.

For more information: Contact us at info@crawco.ca or 1-800-522-1380.

www.crawfordandcompany.ca

In conclusion, work at home options are not recommended as a panacea for all accommodation issues. Working towards identifying a successful solution, obtaining detailed information on functional abilities and carefully deliberating transitional work options remains the best course of action for lost time mitigation, regulatory compliance and controlling an organization’s cost of risk.

In this case, a picture is worth thousands of dollars.

Mutual fund fee model

1.25%

Fee-based model (using ETFs)

Advisory program¹

2.50%

Average client all-in cost

1.25%

Industry fund MER average²

1.25%

Advisory program¹

0.22%

Vanguard ETF MER average³

1.47%

Average client all-in cost

Buying ETFs within a fee-based model could save your clients more than 1% per year in fees. Over the next 20 years, that could leave them with an extra $132,792 to buy something special, take a vacation or, you know, invest for the future.

Vanguard ETFs®. Good for you and your clients.

Visit vanguardcanada.ca/advisorsalpha to learn more 1 Assumed advisory program fee for illustrative purposes. 2The Series F average management expense ratio for all mutual funds based on the Canadian Investment Funds Standards Committee (CIFSC) category from Investor Economics through December 31, 2014. Calculation excludes ETFs, funds with performance fees, money market funds, funds with management fees charged at account level, hedge funds, index funds and LSVCC funds. Vanguard and CIFSC are unaffiliated. MERs are subject to change.3The MERs are average MERs as of December 31, 2014. Vanguard ETF® MERs were sourced from the Management Reports of Fund Performance. MERs include waivers and absorptions and are subject to change. 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. The hypothetical examples do not represent the return of any particular investment. Assumptions include a 6% annual return, an initial investment of $250,000, an average all-in cost of 2.50% for the mutual fund fee model and an average all-cost of 1.47% for the fee-based model. Distributions are included but transaction costs, bid/ask spreads, inflation, and income taxes payable by any unit-holder, are not included. Actual investment results will vary upward or downward and the examples do not factor risks associated with market volatility or short-term events. Investments in the Vanguard ETFs can be made through a financial advisor or on-line brokerage account. Please consult your financial and/or tax advisor for financial and/or tax information applicable to your specific situation.

© 2016 Vanguard Investments Canada Inc. All rights reserved.

Enhanced returns are a great alternative Mackenzie Diversified Alternatives Fund Alternative asset classes drive some of the world’s most successful pension funds.

Mackenzie Investments has developed a fund that uses alternative asset classes to complement typical balanced portfolios. Drawing on the expertise of some of the industry’s leading thinkers, the Mackenzie Diversified Alternatives Fund is a portfolio of 7 different asset classes and aims to produce enhanced risk-adjusted returns.

Talk to your advisor about Mackenzie Investments today, or visit our website mackenzieinvestments.com to learn more.

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. The asset allocation of traditional balanced portfolios is considered to be 60% equities and 40% fixed income. Enhanced risk adjusted returns means reducing the amount of risk involved in producing a return on investment, or increasing the level of return for the same amount of risk.

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