Wealth Professional 8.04

WWW.WEALTHPROFESSIONAL.CA ISSUE 8.04 | $12.95

THE HOLISTIC APPROACH Seven ideas for building a more well-rounded practice

GOING AGAINST THE GRAIN

How an unconventional model has paid off at Nicola Wealth

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THE NEWEST DESIGNATION

Can the recently launched PFA become advisors’ acronym of choice?

WHEN TO CALL IN THE PROS

The benefits of outsourcing investment management decisions

3/04/2020 6:00:41 AM

T H A N K YO U

F O R A L L T H AT Y O U D O It is during unprecedented moments of fear and anxiety that the calm and rational hand of a trusted advisor can offer investors guidance and reassurance for the way ahead.

To the legion of professional advisors across the country, we commend you for all that you are doing to help your clients navigate a clear path forward.

Thank you.

David Chapman President

Louis H. DeConinck President

John Kelleway President

Adam Elliott Senior Vice-President

INVESTED IN YOU.

The logos displayed are trademarks of Industrial Alliance Insurance and Financial Services Inc. and are used under license.

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3/04/2020 6:04:52 AM

ISSUE 8.04

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

CONTENTS

@WealthProCA facebook.com/WealthProCA

UPFRONT 02 Editorial

Why being open about your strategies benefits everyone

04 Statistics

32

Key data that should be on your radar this month

06 Head to head

FEATURES

20

FINDING SUSTAINABILITY IN INFRASTRUCTURE Middlefield Group’s latest fund offers investors a defensive option

At a time when advisors are under pressure to do more than just select investments, what are the best ways to add value? WP takes a closer look at seven options

INDUSTRY ICON

10 Intelligence

This month’s big movers, shakers and new products

14 Alternative investment update

34

How to use cap rates to suss out real estate investments

ADVISOR PROFILE

PEOPLE

19 Opinion

The case for investing in small-cap stocks right now

As coach to other advisors, Bart Hunter strives to impart the importance of adding value

Nicola Wealth chairman and CEO John Nicola on how his firm’s unconventional operating model has put it ahead of the curve

16

Will the new PFA designation become the gold standard for advisors?

Why the brief TSX halt in February shouldn’t have affected ETF trading

PEOPLE

PEOPLE

08 News analysis

12 ETF update

SPECIAL REPORT

THE HOLISTIC APPROACH

Advisors reveal their top choices for adding global exposure

39 Career path

Lorenzo Pederzani has never been afraid to make a bold move

40 Other life

In the fast lane with Porsche enthusiast Morris Briglio

FEATURES

36

THE TWILIGHT OF THE STOCK PICKER One advisor takes WP behind the scenes of his transition to a holistic advice model

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

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3/04/2020 6:05:02 AM

UPFRONT

EDITORIAL wealthprofessional.ca

Sharing expertise, adding value

T

his month, WP is debuting a new special report focused on the holistic approach to wealth management. After lots of discussion with advisors of various backgrounds, locations, book sizes and age, holistic wealth management emerged as a common theme that our readers want to know more about. The report, which begins on page 20, takes a look at several different ways advisors can add more value to their practices.

The notion of adding value and fostering relationships is certainly relevant today as advisors look to compete with low-fee robo-advisors and help their clients navigate the extremely uncertain market environment brought about by the COVID-19 pandemic. While many of the strategies covered in this report have come up in WP before, we hope that by bringing them all together, this feature can serve as a go-to guide for advisors.

When advisors share their strategies with their peers, it ultimately helps improve services for clients It’s important to recognize the advisors and firms who chose to share their expertise, strategies and opinions for this report and all of WP’s stories. In doing so, they are helping the industry as a whole at a time when competition is high. This epitomizes what WP is all about – being a resource for advisors by connecting them with their peers and sharing industry stories to help them improve their practices.

Advisors aren’t always willing to divulge their strategies or are sometimes prevented from doing so by their firm. But as one advisor recently pointed out to WP, when individuals are prohibited from speaking to industry media, the client is the one who is hurt in the end – after all, when advisors share their strategies with their peers, it ultimately helps improve services for clients. WP would like to extend a big thank you to those advisors and firms (and their compliance departments) who are willing share their ideas and expertise with the aim of improving the entire industry.

The team at Wealth Professional

ISSUE 8.04 EDITORIAL

SALES & MARKETING

Editor Darren Matte

Vice President, Media and Client Strategy Dane Taylor

Writers Libby MacDonald Leo Almazora James Burton David Kitai Executive Editor Ryan Smith Copy Editor Clare Alexander

CONTRIBUTORS Don Walker

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

National Account Manager Alan Stewart National Account Manager Blase Wasser Vice President, Sales John Mackenzie Project Coordinator Jessica Duce

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

EDITORIAL INQUIRIES

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

ADVERTISING INQUIRIES dane.taylor@keymedia.com

KMI Publishing and Events 20 Duncan Street, Suite 300 Toronto, ON M5H 3G8 tel: +1 416 644 8740 www.keymedia.com Offices in Toronto, London, Sydney, Denver, Auckland, Manila, Singapore, Seoul

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

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

3/04/2020 6:01:17 AM

UNDERCURRENTS B e y ond th e Ob v i ous

orstrong Global employs a macro thematic approach that identifies significant long-term secular trends and their underlying influences on markets. Often contrary to the prevailing wisdom, these “undercurrents� signal important changes before they are readily recognizable.

By focusing on themes vs. stocks, we can generate returns that have a lower correlation to the overall market and provide a smart complement to traditional bottom up approaches.

Toll Free: 1-888-419-6715 www.forstrong.com

G L O B A L

Tyler Mordy President & CIO

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3/04/2020 6:01:20 AM

UPFRONT

STATISTICS OIL PRICES CRASH S&P AND TSX HAMMERED

BY COVID-19

3,500

43.96%

44.98%

3,380.16

3,257.85

3,248.92

1,260.82

1,254.07

3,128.2

3,000

After opening the year by continuing the momentum of 2019, the S&P 500 and S&P/TSX Composite indexes began to feel the toll of the COVID-19 pandemic and its economic impact in late February, when the S&P 500 lost 10% of its value over the course of 11 days (the fastest market correction ever recorded) and the TSX saw all of the gains it had made in 2020 wiped out in four days of trading. In March, both indexes got a bit of a lift from the US government’s $2 trillion stimulus package and Canada’s promise of a federal wage subsidy.

Drop in the price of West Texas Intermediate since mid-February

3,289.29

2,500

2,000

1,500

1,237.

1,288.61

1,277.47

1,000

Decline in the price of Brent crude since mid-February

500 Jan 2

63.71%

Drop in the price of Western Canadian Select since mid-February

Jan 15

Feb 3

Feb 14

MARKET-NEUTRAL STRATEGY SOARS While many strategies, including alternatives, have seen negative returns since the selloff in late February, AGF’s market-neutral strategy, which is designed to mitigate risk without missing upside, saw returns of 15.3% between February 20 and March 12.

VALUE OF AGFIQ US MARKET NEUTRAL ANTI-BETA CAD-HEDGED ETF (QBTL)

$30

$27.14

$27.65

$27.44

Mar 12

Mar 18

$26.80

$26.15 $25

$25.03 $24.26

46.49%

$23.03

$23.35

$23.93

$23.81

Feb 14

Feb 20

$24.58

$24.90

Decline in the price of the OPEC basket since mid-February $20 Source: Oilprice.com, as of March 17

Jan 2

Jan 15

Feb 3

Feb 26

Feb 28

Mar 2

Mar 6

Mar 9

Mar 10

Source: ETF Strategy Note, March 15, 2020, National Bank Financial; TMXmoney.com

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3/04/2020 6:01:43 AM

Feb 25

80.16

THE GOVERNMENT DEBT OUTLOOK S&P 500 Index

3,128.21

3,090.23

2,954.22 2,746.56

2,529.19 2,480.64

35%

2,584.59

2,475.56

GOVERNMENT OF CANADA NET DEBT TO GDP RATIO

2,541.47

2,508.59 2,237.40

30%

30.1% 29.7% 28.1%

1,237.46

26.9%

1,183.45

288.61

eb 14

The Canadian government’s net debt to GDP ratio has been steadily declining in the years since the 2008 financial crisis and remains low, putting it in a relatively good fiscal position to handle the added stresses from COVID-19.

S&P/TSX Composite Index (USD)

26.2%

25%

1,159.54 1,027.01

863.04

899.61

877.22

855.71 938.50

862.66 739.18

Feb 25

Feb 28

Mar 2

Mar 9

Mar 12

Mar 16

Mar 18

Mar 23

Mar 25

Mar 27

20%

Mar 31

Q4 2015

Q4 2016

Q4 2017

EMERGENCY RATE MOVES

US TREASURY BONDS RISE

BMO Long-Term US Treasury Bond Index ETF (ZTL)

TD US Long-Term Treasury Bond ETF (TULB)

Q4 2019

Source: Scotiabank Economics, Statistics Canada

Sources: SPIncidies.com

The recent market turmoil has caused investors to flock to safe-haven assets that tend to do well in bear markets, such as long-term government bonds. The popularity of US Treasuries during the crisis can be witnessed in the rise of a pair of Canadian-issued ETFs that invest in the instrument.

Q4 2018

In March, both the Bank of Canada and the US Federal Reserve raced to slash interest rates to lows not seen since 2017 in response to the COVID-19 pandemic.

BANK OF CANADA

2.0%

$75 1.5%

US FEDERAL RESERVE

2.0%

1.75%

1.5%

1.75%

$60

1.25%

1.0%

1.25%

1.0%

$45

0.75%

0.5%

$30

0.5%

0.25%

0.25% $15

Jan 2 Jan 13 Feb 3 Feb 14 Feb 28 Mar 2

Mar 9 Mar 13 Mar 16 Mar 18 Mar 23 Mar 25 Mar 27 Sources: Bloomberg.com, TMXmoney.com

0%

1/21/2020

3/4/2020

3/16/2020 3/27/2020

0%

1/29/2020

3/3/2020

3/15/2020

Sources: Bank of Canada, US Federal Reserve

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3/04/2020 6:01:44 AM

UPFRONT

HEAD TO HEAD

Where are you adding global exposure to portfolios?

Advisors reveal their top strategies and geographic preferences for helping investors overcome home bias

David Kletz

Francis Sabourin

François Têtu

Vice-president and portfolio manager Forstrong Global

Director of wealth management and portfolio manager Richardson GMP

Vice-president and portfolio manager RBC Dominion Securities

“To build more robust and resilient portfolios for our clients, we embrace broad diversification, not only across asset classes, but also across global regions, sectors and risk factors. The goal is to ensure stability through all market environments.

Currently, we are particularly constructive on equities in emerging Asia. With orthodox and accommodative monetary policy, a vast improvement in fiscal discipline since the Asian financial crisis, a burgeoning middle class, an increasingly large contribution to global growth, and reasonable valuations, emerging Asian stocks offer a compelling investment thesis.”

“I used to think French wine was the best thing on earth. Now there are so many established and emerging countries producing high-quality and -value wines that I cannot be as particular anymore.

Investing is similar: We are biased about our own or favourite country, but what about emerging or frontier markets where not so widely known public companies trade at huge discounts?

Investing is like drinking wine; don’t look at the label to judge the value of the investment. Blind taste or do the research and apply due diligence. You may receive a good return if you are open-minded, patient and value-oriented.”

“It’s almost impossible to avoid international exposure in today’s globally interconnected economy. Nearly half the revenues of the US companies in the S&P 500 Index come from overseas. And more than half the world’s market capitalization now lies outside the US. Our long-term capital market return expectations indicate that international stocks have higher expected returns than US large-cap stocks over the next 10 years.

Besides emerging markets, some European stocks should be considered.

Though not without risk, a global allocation provides diversification benefits and is one of the underpinnings of modern wealth management.”

LOOKING TO FOREIGN SHORES International exposure is practically woven into today’s investments: Almost half of the revenues of American companies in the S&P 500 Index originate internationally.

But those who go beyond that could benefit even more – Charles Schwab and Thomson Reuters have predicted a 7.4% annualized return for the S&P 500 Index over the next decade, but a 7.8% return for the MSCI EAFE Index and 8.5% for the MSCI Emerging Markets Index. In contrast, the Oracle of Omaha himself, Warren Buffett, apparently dismisses broader international diversification, saying that he and his wife maintain an index fund portfolio that’s 90% S&P 500 and 10% Treasuries, and that such a makeup is probably good enough for most investors.

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3/04/2020 5:59:46 AM

( D O D D

Initial Public Offering

March 25, 2020

Sustainable Infrastructure DIVIDEND FUND

$80,000,000

Sustainable Infrastructure Dividend Fund managed by Middlefield Group Price: $10 per Unit CIBC Capital Markets BMO Capital Markets

Scotiabank Canaccord Genuity Corp.

RBC Capital Markets TD Securities Inc.

Industrial Alliance Securities Inc. National Bank Financial Inc. Manulife Securities Incorporated Raymond James Ltd. Stifel Nicolaus Canada Inc. Middlefield Capital Corporation Echelon Wealth Partners Inc. Mackie Research Capital Corporation

(L to R) TOM TOLL, Director, Sales and Marketing, CRAIG ROGERS, Managing Director, Corporate Development, ANTHONY TAVELLA, Executive Director, Head of ETFs, NANCY THAM, Managing Director, Sales and Marketing, JEREMY BRASSEUR, Managing Director, Corporate Finance, DEAN ORRICO, President and Chief Investment Officer, ROB LAUZON, Managing Director and Deputy Chief Investment Officer, DENNIS da SILVA, Managing Director and Senior Portfolio Manager, Resource Group, VINCE GRECO, Managing Director, Trading and Portfolio Manager, MICHAEL BURY, Managing Director, Sales and Marketing and Portfolio Manager and SHANE OBATA, Executive Director, Investments and Portfolio Manager To learn more about Sustainable Infrastructure Dividend Fund, speak with your financial advisor or contact us at: 1-888-890-1868 invest@middlefield.com www.middlefield.com

Middlefield Limited 812 Memorial Drive NW Calgary, Alberta T2N 3C8

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

You will usually pay brokerage fees to your dealer if you purchase or sell units of investment funds on the Toronto Stock Exchange or other alternative Canadian trading system (an “Exchange�). If the units are purchased or sold on an Exchange, investors may pay more than the current net asset value when buying and may receive less than the current net asset value when selling them. There are ongoing fees and expenses associated with owning units or shares of an investment fund. An investment fund must prepare disclosure documents that contain key information about the fund. You can find more detailed information about the fund in these documents. Investment funds are not guaranteed, their values change frequently and past performance may not be repeated.

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UPFRONT

NEWS ANALYSIS

A foundation for advisors The newly introduced PFA designation looks to bring clarity to the industry and support the retention of advisors

IN FEBRUARY, Advocis launched a new designation for financial advisors: the Professional Financial Advisor (PFA). The two-year online program is aimed at advisors who are either just starting out or are looking to grow their practice. While the financial advice industry is already home to a slew of designations, Advocis believes the PFA will fill a necessary foundational void while also addressing the increased scrutiny surrounding titles and combating low advisor retention rates.

“When we look across the industry landscape at individuals who hold a life and health insurance, MFDA or a securities licence, there are about 100,000,” says

found that advisors wanted to learn more about how to run a practice and how to fulfill the role of a financial advisor to their clients.

In addition to addressing that need, Pollock is optimistic that the PFA program will help improve the industry’s retention numbers.

“We know that retention in the industry is fairly low,” he says. “Of advisors in the industry for four years or less, 70% have dropped out. That means a retention rate of 30% after four years. We believe, collectively, we can do a better job than that. There is a lot more that goes into being an advisor, like how to build a practice, write a letter of engagement, mitigate risk and build a client’s wealth, and what an advisor’s responsibilities

“We think we can do a better job as an industry in raising the educational bar for financial advisors and clients” Greg Pollock, Advocis Advocis president and CEO Greg Pollock.

“About 25,000 have a designation, so there is a large gap. We see that as problematic; we think we can do a better job as an industry in raising the educational bar for financial advisors and clients.”

In research conducted in the lead-up to the launch of the PFA program, Advocis

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are. Then there’s the whole area of ethics. We believe addressing all of that together, with this designation, will help advisors develop a foundation and improve the overall retention rates for the industry.”

The program itself will provide advisors access to virtual mentors, facilitators and trainers, as well as a library of webinars. After

each semester, participants will write an exam and be assessed. The program is based on four disciplines: practice development, financial planning fundamentals, compliance and ethics.

The first official cohort of participants began on April 1, but Advocis ran a pilot of the designation with 352 participants that will wrap up this spring. One of those participants is Tom Lowden, a financial advisor at Lowden Clear Wealth Management, who says his motivation to undertake the designation was based on two factors.

“The first was the legislation on titles – I wanted to get the title,” Lowden says. “The other was I am very focused on education and saw this as an opportunity to get better at my craft.”

The PFA is designed to be a generalist designation, and Pollock hopes it will help advisors learn the soft skills associated with the industry, at which point they can move on to specializations. He adds that Advocis’

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3/04/2020 5:59:08 AM

PUBLIC AWARENESS OF DESIGNATIONS The need for more information and clarity around designations came front and centre in Advocis’ recent survey on the public’s perception of Ontario’s Financial Professionals Title Protection Act.

65%

of Ontarians said they are unaware of the act

11%

said they are “definitely aware” of it

33%

felt they could name an existing professional designation specific to financial services

50%

believe their financial advisor holds a professional designation

44%

research revealed that many Canadians lack clarity on what titles and regulations mean to the advisor industry, yet almost all wanted some sort of oversight.

“We also spoke with independent and financial institutions; even institutions say

I have this will add credibility,” he says. “It also shows my clients they are dealing with someone who is a professional at this level. I think being recognized by a governing body shows your level of commitment.”

So far, the response from participants of

“Knowing I have this will add credibility.

It also shows my clients they are dealing with someone who is a professional” Tom Lowden, Lowden Clear Wealth Management their employees can struggle to relate to and read customers,” Pollock says. “So there’s no doubt the program will serve the needs of independents and those organizations as well.”

As an independent advisor, Lowden believes having the designation will bring additional clarity to his practice. “Knowing

the pilot has been very positive. “I thought it was very well laid out and a good balance of professional development and technical knowledge,” Lowden says. “I would recommend it to any advisor; it really is twofold.

For anyone entering the industry, I think it is a must-have. I also know many others who, like me, have been in the industry for a while

said they weren’t sure if their advisor has a designation

72%

of Ontarians feel that regulations requiring professional designations for advisors would help protect them Source: Advocis/Hill+Knowlton Strategies, January 2020

and who have designations, but I think it can help them refine their knowledge and update their skills.”

Pollock hopes the PFA will contribute to greater clarity around designations as more and more advisors seek it out. “We believe when we get further down the road, clients will be able to say they have an advisor or planner who has a background that serves their needs,” he says. “We hope that this designation will be that foundation and will grow to a point where the public asks their advisor, ‘Are you a PFA?’”

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3/04/2020 5:59:12 AM

UPFRONT

INTELLIGENCE CORPORATE ACQUIRER

TARGET

PRODUCTS COMMENTS

CI Financial

WisdomTree

CI has finalized its acquisition of WisdomTree’s Canadian ETF business

Duo Bank of Canada

Fairstone Financial Holdings

Toronto-based Duo Bank has agreed to purchase all outstanding shares of Fairstone Financial Holdings

Franklin Templeton

Legg Mason

Franklin Templeton’s $4.5 billion acquisition of the US-based asset manager will increase its AUM to $1.5 trillion

Hub International

Morneau Shepell

Insurance brokerage Hub International has agreed to purchase Morneau Shepell's benefits consulting practice for $70 million

PARTNER ONE

PARTNER TWO

COMMENTS

BDO

Lixar

BDO is joining forces with AI and data company Lixar to accelerate artificial intelligence and data-driven solutions in Canada and globally

Mogo

Goeasy

Mogo’s three-year lending partnership with Goeasy includes the sale of the majority of its MogoLiquid loan portfolio

New Gold

Ontario Teachers’ Pension Plan

New Gold’s partnership with the OTPP gives the miner $300 million in exchange for selling a portion of the free cash flow from its flagship operation

Sun Life rolls out five new private investment pools

Sun Life Global Investments has launched a new line of private investment pools that offer exposure to various asset classes and geographic markets. Sun Life’s new private investment pools are actively managed and don’t require the high minimum investments typically associated with similar private pools. The five offerings include the Sun Life Core Advantage Credit Private Pool, the Sun Life Opportunistic Fixed Income Private Pool, the Sun Life Global Tactical Yield Private Pool, the Sun Life Global Dividend Private Pool and the Sun Life Real Assets Private Pool.

Franklin Templeton acquisition creates $1.5 trillion active management giant

Global investment manager Franklin Templeton has agreed to acquire USbased asset manager Legg Mason in a $4.5 billion deal that would create an active-management investing giant worth around $1.5 trillion in AUM. Franklin will pay all cash for Legg Mason and will also assume about $2 billion of the company’s debt; the deal values the asset manager at $50 per share.

“This is a landmark acquisition for our organization that unlocks substantial value and growth opportunities driven by greater scale, diversity, and balance across investment strategies, distribution channels, and geographies,” said Greg Johnson, executive chairman of the board at Franklin Templeton.

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Harvest introduces unhedged units of three ETFs

Harvest Portfolios has announced new Class B unhedged units for three of its TSX-listed ETFs: the Harvest Healthcare Leaders Income ETF (HHL.B), the Harvest Brand Leaders Plus Income ETF (HBF.B) and the Harvest Tech Achievers Growth & Income ETF (HTA.B). Focused on different groups of equity issuers, the three strategies offer monthly cash distributions and the opportunity for capital appreciation, as well as lowered volatility through the use of covered-call options on up to 33% of the underlying portfolio securities.

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3/04/2020 5:58:44 AM

PEOPLE DSCs to end for almost all Canadian provinces

Deferred sales on mutual funds will end for every province except Ontario on June 1, 2022. In late February, the securities regulatory authorities of every province but Ontario adopted rules that will prohibit fund organizations from paying upfront sales commissions to dealers as an incentive to sell their mutual funds.

The Ontario Securities Commission, meanwhile, decided to restrict DSCs instead and recently released a proposal outlining those restrictions, including prohibiting the sale of mutual funds with the DSC option to clients who are age 60 and over or who have an investment time horizon that’s shorter than the DSC schedule.

RBC GAM makes changes to private equity pool

RBC Global Asset Management has terminated its relationship with Guardian Capital, the subadvisor of its RBC Private Canadian Growth Equity Pool; as of mid-March, RBC GAM has assumed portfolio management responsibilities for the pool.

RBC GAM also announced that it plans to merge the Private Canadian Growth Equity Pool into the Phillips, Hager & North Canadian Equity Fund on April 30 in an effort to reduce duplication of its fund offerings.

Unitholders of the pool will receive an equivalent series of units of the PH&N fund on a dollar-for-dollar and tax-deferred basis.

NAME

LEAVING

JOINING

NEW POSITION

Shawn Beber

N/A

CIBC

Chief risk officer

Laura DottoriAttanasio

N/A

CIBC

Senior executive vicepresident, Canadian personal and business banking

Cam Fowler

N/A

BMO

Chief strategy and operations officer

Ernie Johannson

N/A

BMO

Group head, North American personal and business banking

Gordon Johnson

Borden Ladner Gervais

British Columbia Securities Commission

Vice-chair

Christina Kramer

N/A

CIBC

Senior executive vice-president of technology, infrastructure and innovation

Jonathan Tétrault

Cirque du Soleil

Sagard Holdings

Managing partner

BCSC appoints new vice-chair

The British Columbia Securities Commission has named Gordon Johnson as its new vice-chair. With more than 30 years of securities law and senior litigation experience, Johnson was previously a partner at Borden Ladner Gervais, where he focused on both prosecuting and defending clients on regulatory issues and investment claims and dealing with disputes between investment firms. He also has significant experience in administrative law, having appeared as counsel before many tribunals, including tribunals of the BCSC. “We will surely benefit from Gordon’s wealth of experience, especially in the areas of capital markets and administrative law,” said BCSC chair and CEO Brenda Leong. “His insights and perspectives as a seasoned practitioner will be invaluable in helping to guide our regulatory policy and tribunal decisions.”

CIBC adds to its leadership team National Bank launches three active sustainable ETFs

National Bank Investments has launched three new actively managed sustainable ETFs on the TSX. The NBI Sustainable Canadian Bond ETF (NSCB) invests in Canadian debt instruments that raise funds for projects or businesses with a positive environmental impact. The NBI Sustainable Canadian Equity ETF (NSCE) takes a sustainable approach to investing in Canadian equity securities, and the NBI Sustainable Global Equity ETF (NSGE) makes sustainable investments in stocks issued by companies around the world.

CIBC has made several promotions in its leadership team, including appointing Christina Kramer to serve as senior executive vice-president for technology, infrastructure and innovation. Kramer joined CIBC in 1987 and has held a variety of senior executive roles within its retail, business banking and human resources groups. Most recently, she was senior executive vice-president and group head of personal and small business banking.

“Christina’s deep experience with CIBC across operations and business leadership roles, coupled with her experience bringing key retail banking innovations to market for our clients, positions her well to lead our technology, innovation and infrastructure efforts at a time when client expectations and technological capabilities are changing rapidly,” said CIBC president and CEO Victor Dodig.

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3/04/2020 5:58:40 AM

UPFRONT

ETF UPDATE NEWS BRIEFS ETF assets sink in February despite surge in sales

The latest monthly report from the Investment Funds Institute of Canada (IFIC) hints at the market turmoil caused by the COVID-19 pandemic. ETFs saw net sales of $8.5 billion in February, more than double the $3.7 billion recorded in January. However, net assets in ETFs dipped from $211 billion in January to $210.3 billion in February. The IFIC figures mirrored those in the US, where ETF assets under management dropped nearly 7% to US$4.1 trillion, according to Cerulli Associates.

Horizons ETFs finalizes merger of two of its cannabis ETFs

Horizons ETFs has completed the merger of the Horizons Emerging Marijuana Growers Index ETF (HMJR) into the Horizons US Marijuana Index ETF (HMUS). Because HMUS is substantially larger than HMJR, Horizons believes that merging the funds will provide unitholders the opportunity to continue their investment in a marijuana-focused ETF that will have larger market capitalization and greater exposure to large-cap, publicly traded companies in the US marijuana and hemp industries.

Bond ETFs stand up to coronavirus stress test

Over the past few weeks, large gaps have developed between the value of bond ETFs and that of their underlying holdings, reopening questions about the bond ETF structure and whether trading in liquid bond ETFs could be severely crippled by dramatic selloffs in the underlying illiquid bonds. But in a recent analysis of FactSet data, Wall Street

12

Journal reporter Jon Sindreu found that this nightmare scenario hasn’t played out yet. Looking at the weekly primary market flows of the iShares investmentgrade ETF, Sindreu found that flows as a percentage of share turnover have not exceeded 200% since the COVID-19 selloff started and were mostly below 100% in the selloff’s latter stages; by comparison, that ratio spiked past 300% in late June 2019.

Caldwell Investment Management launches first ETF

Caldwell Investment Management has rolled out its first ETF offering, the US Dividend Advantage ETF (UDA).

An ETF version of an existing fund, UDA focuses on so-called ‘dividend champions’ – companies with strong returns on capital that consistently increase their dividends. The fund gives investors access to small- and mid-cap companies with strong free cash flow and growth prospects that are often overlooked by other dividend mandates. In addition, UDA offers monthly distributions and the potential for capital appreciation; it has a management fee of 0.75%.

First Trust expands its family of target outcome ETFs

First Trust Canada has added a new option to its suite of target outcome ETFs: the First Trust Cboe Vest US Equity Buffer ETF – February (FEBB.F).

The fund seeks to match the price return of the SPDR S&P 500 ETF Trust, up to a pre-determined upside cap while buffering against potential losses.

To achieve this, the fund uses flexible exchange options: equity or index option contracts that trade on an exchange but provide the ability to customize key contract terms like exercise prices, styles and expiration dates.

TSX halt frustrates the ETF industry The industry goes on the offensive to counter mixed messaging about the hiccup On the afternoon of February 27, the Toronto Stock Exchange, the TSX Venture Exchange and the TSX Alpha Exchange experienced a technical issue and briefly stopped, only to resume the following morning. The pause left many frustrated, including Pat Dunwoody, executive director of the Canadian ETF Association, largely because of the misinformation that resulted.

“The halt should not have impacted ETFs at all, yet some trading slowed down because of the media saying trading was halted,” Dunwoody says. “The concern I have is the messaging that goes out saying ‘you can’t trade,’ because if you look throughout the afternoon, the bid-ask spreads didn’t substantially change or change at all. The market makers continued to do their job. Luckily, there wasn’t a huge change in market price at that point, so people didn’t lose out on a trade they wanted. The messaging being wrong was the frustration.”

Dunwoody says she was pleased to see Jos Schmitt, president and CEO of the NEO Exchange, go on BNN to explain that there are multiple platforms, so if one exchange goes down, trades are still able to be made.

With the TSX on pause while other exchanges were still running, there could have been a perception that ETFs and their NAVs were misaligned. But the flexibility and resiliency of the ETF model allows the

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situation to be addressed with ‘fair value’ – a process all funds need to have so that if something happens to a fund in one market or on one exchange, a fair price can be established on another. In the case of the TSX halt, that meant looking at other exchanges to get an accurate reflection of ETF values.

With these processes in place, Dunwoody says the real danger highlighted by this situation is the misinformation that can get out to the investing public.

“The halt should not have impacted ETFs … The messaging being wrong was the frustration” “When the media says, ‘The market is down, and you can’t trade’ in a time when we are trying to get more advisors to switch from mutual funds to ETFs, that is a terrible message,” she says. “Advisors will say they don’t want to buy ETFs because they think they might not be able to get clients’ money when they need it.”

Dunwoody says her association and the wider ETF industry will continue to educate investors and advisors that events such as the TSX halt shouldn’t have an impact on ETFs. “The message is that it doesn’t matter if something like this happens because there are processes in place to manage your trading,” she says. “We will try to push it as if it’s normal, but most of the time headlines win out. I also think it’s important to remind investors to treat ETFs as long-term investments and not to panic sell. I hope that is the messaging from advisors as well.”

Q&A

Alfred Lee Director, portfolio manager and investment strategist BMO GLOBAL ASSET MANAGEMENT

Years in the industry 20 Fast fact The BMO Long-Term US Treasury Bond Index ETF (ZTL) reached its highest value on March 9, at $73.21

Bond ETFs’ COVID-19 spike How have long-term government bonds reacted to the recent market activity caused by COVID-19?

We are in extreme risk-off environment right now. If you look at the market and risk assets in general like the S&P 500, the market is selling off. The velocity to sell off this time is higher than what we saw in 2008, where I don’t believe we saw as many circuit breakers.

There is a lot of panic selling in the market right now.

As a result, people gravitate towards safe-haven assets. One of the bellwether safe-haven plays has always been US long-term Treasuries. The reason why is that US Treasuries are an area where people can find liquidity, and in addition, long duration. When risk is selling off, central banks will tend to lower interest rates, as we have seen. From a duration perspective, US Treasuries tend to benefit as well. The last trifecta, especially if you are Canadian, is the US dollar exposure. In the last couple weeks, we saw the USD appreciate quite a bit, because in an ultimate risk-off environment, people move towards the US dollar. If you are invested in an ETF like ZTL, it is priced in Canadian dollars, so you get the US dollar exposure, as well as the long duration and Treasury exposure.

Is the recent phenomenon exclusive to US bonds, or is it a trend that has been seen in Canada and other countries?

We have seen a similar story with the yen in the past. In 2008, those that had the biggest treasury bond markets, which can absorb this type of liquidity, are where we saw the safe havens. In Canada, there is a lack of liquidity. Canada does do well – long-term federal Canadian bonds have performed well in the last year, and they do exhibit that safe-haven play, especially compared to Canadian corporates. However, when you look at US Treasuries, it is like a global asset class where investors all around the globe move towards US Treasuries in this market, where there is a demand for liquidity.

What are the advantages to getting long-term US bond exposure through an ETF like ZTL? The benefit, especially to Canadian investors, is that you are transacting in Canadian dollars. For you to go out and buy US Treasuries as a retail investor, you have to transact in USD, which could be cost-prohibitive. With an ETF, as long as you can buy it on an exchange, you can buy the ETF. It is also a package – you are not buying one bond, but rather a basket of US Treasuries, so it is much more efficient.

What risks are there with long-term government bonds?

Duration is the biggest risk. For example, if some fiscal policy is introduced that calms the nerves in the market, you could potentially see a repricing in bond yields and people moving back into risk assets like equities. Overall, if you have a well-balanced portfolio and don’t look at US Treasuries in isolation – if you have US long-term Treasuries mixed into a portfolio of equities and traditional bonds – it smooths out and improves the efficiency of the overall portfolio.

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UPFRONT

ALTERNATIVE INVESTMENT UPDATE

Cap rates hold the key in real estate Comparing capitalization rates gives investors more information about potential real estate investments

rates are also like bond yields, since you pay a higher premium for an asset that has less of a chance of defaulting.”

Managers can use the data from similar properties in a particular market to determine what the cap rate would be on a potential investment property. “You want to buy properties at a higher cap rate and sell them for a lower cap,” Pochodyniak explains, but he adds that “you need to be careful – a higher cap rate for a property indicates greater risk associated with the investment.”

“The lower the cap rate, the higher the value someone is willing to attribute to the asset”

It can be tricky for investors, advisors and even managers to determine where to look for real estate investments. One indicator that can provide additional information is the capitalization rate, or cap rate, which is a factor MacNicol & Associates Asset Management uses to determine opportunities for its Real Estate Fund.

“The cap rate is the ratio of a real estate asset’s year-one net operating income (NOI) to cost,” explains Joseph Pochodyniak,

NEWS BRIEFS

portfolio manager of alternative assets at MacNicol & Associates. “Cap rate is effectively how much a buyer is willing to pay for the NOI cash flows. Typically, a lower cap rate reflects a much tighter market, where there is a lot of capital chasing fewer deals.

Consequently, potential buyers are willing to pay more for the cash flows to own a building.

The lower the cap rate, the higher the value someone is willing to attribute to the asset, just like a bond. From a risk perspective, cap

CSA floats enhanced Canadian crowdfunding rules

The CSA has launched a consultation on its proposed rules to govern startup securities crowdfunding.

Many provinces already have their own regulations; the CSA proposal lays out harmonized rules that would enhance and replace those requirements. According to CSA president and CEO Louis Morisset, “This proposed National Instrument would introduce a single, harmonized set of rules and increase the thresholds for capitalraising and investing while still providing appropriate investor protection.”

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As for what’s considered a good cap rate, Pochodyniak says it can vary. For his firm, where the goal is to preserve capital first and grow it second, assets like nightclubs, hotels and golf courses are off the table. Instead, MacNicol & Associates focuses primarily on multi-family residential, which is pricey but stable, and industrial, which offers exposure to areas like warehouses and distribution centres. In those classes, the firm looks for a cap rate in the 4% to 7% range.

While cap rates are a good indicator for real estate asset managers, Pochodyniak adds that it’s still very important to also include demographic projections as a main driver for the asset class.

DealSquare, FrontFundr to host landmark offering

In January, fintech firm Lendified announced its reverse takeover of Hampton Bay Capital and concurrent $4 million private-placement financing, with an aim to go public this year. Now the firm has expanded investors’ access to its private-placement offering by launching it on both DealSquare and FrontFundr. NEO Exchange president and CEO Jos Schmitt said this makes Lendified “the first mover in Canada to make a pre-go-public privateplacement offering available to all investors in an efficient and accessible manner.”

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Q&A

Dave Kirzinger Principal and acting CEO RISE PROPERTIES TRUST

Fast fact The RISE management team currently owns around $28.9 million worth of the RISE Properties Trust

Targeting the shift to residential real estate What trends stand out to you right now in real estate investing?

What stands out to me is the durability of real estate investing. The durability of bricks-and-mortar investing is really powerful. We have been in an extended period of good economic times, and people are getting worried about what that means for their portfolios.

However, in what we do – apartment buildings – you can see it, touch it, and there are people paying rent.

So it can be kind of calming knowing you have a hard asset you are investing in.

How important is the reliability factor when it comes to hard assets?

Diversification is important in any investment portfolio.

Everyone should have some equities and some bonds, but what people lack is an investment in true real estate. If you buy a publicly traded real estate company, that stock bounces up and down. There is volatility relative to market perception.

When you buy private real estate through a fund, that fund is valued based on the underlying value of the asset. Therefore, the valuation process is more rational, and you don’t see those gyrations.

Are there any areas of real estate you see opportunity in at the moment?

Our focus is strictly the US, with a specific focus on

Short sellers notch $104 billion on coronavirus fears

Investors targeting declines in US stocks saw sizeable gains during late February’s coronavirus-fuelled selloff.

Short sellers logged a one-week paper profit of $104.77 billion in the last week of February, according to data from financial technology and analytics firm S3 Partners.

The tumble in stocks marked a long-awaited correction for bearish investors, many of whom had seen their portfolios bruised by the market’s relentless march higher in 2019 – though few, if any, could have named the coronavirus as a major threat to markets.

Seattle. We like the US because it is a larger market than Canada. The apartment market alone is 30 times bigger in the US than in Canada, in terms of the transaction volume, the construction of apartments, etc.

Also, the US tends to be more landlord-friendly, so there is more you can do with a building. In Seattle, there are not rent controls, so you can go in, buy a building, improve it and raise rents, so there is more opportunity. We are 100% apartments because we like the dynamics of that asset class.

What kind of interest level are you seeing among investors?

It has grown! Fifteen years ago, the institutions, pension funds, etc., were all in real estate, but their weightings to apartments were less than today. People used to shy away from apartments because they thought they were management-intensive. If you had an apartment with 300 units, with 300 families, people would say, ‘I don’t want to deal with that; I’d rather have an office tower with professional firms in it.’

What people have learned is that apartments have delivered better returns, and the management has become much more sophisticated. So there has been a shift away from office and retail into apartments with these large institutions and pension plans because they are seeing better returns and lower volatility on those returns.

Gold rallies again after slump in late February

Gold’s price recovered in early March after taking a hit in the final week of February thanks to global fears around the coronavirus. The precious metal, which has been trending upward since the spring of 2019, surpassed the US$1,600per-ounce mark in mid-February, only to see that progress wiped out when it fell to US$1,565 on February 28. However, gold began to regain its momentum in March, passing the US$1,600 mark once again on March 3 before rocketing up to US$1,670 on March 6.

Oil rout hammers embattled energy producers

Already struggling with a shortage of pipeline space that has weighed on local crude prices and limited growth prospects, Canadian energy producers were dealt another blow in early March when Saudi Arabia announced plans to boost oil output. That announcement, combined with reduced demand due to COVID-19, sent the price of Western Canada Select tumbling around 19% to $22.51 a barrel on March 9, which was in line with the 20% drop in the price of West Texas Intermediate.

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PEOPLE

INDUSTRY ICON

SPREADING THE WEALTH John Nicola created an unconventional model when he founded Nicola Wealth.

Twenty-five years later, it continues to prove successful

JOHN NICOLA, chairman and CEO of Nicola Wealth, is a big believer in sharing the pie. To build and grow a business, Nicola says, you need others who are committed to your vision. That’s why as his firm grows, so does his staff ’s share of the pie through profit sharing. That’s just one of the many elements that has made Nicola Wealth unique and successful over the past 25 years.

A career in financial services wasn’t Nicola’s first choice. In the late 1960s and 1970s, he was playing in a rock band that experienced moderate success, but Nicola realized that might be as far as he could go with music. He left the band was looking for something else when another band member encouraged him to apply at MetLife.

“I said, ‘Are you serious – life insurance?’

It was the worst job I could imagine,” Nicola recalls. “But he said he was being paid twice as much as we made in the band. Because the pay was decent, I decided to apply, but I was rejected three times.”

Nicola didn’t take no for an answer, even going as far as taking an aptitude test to prove to the manager that he could handle the role.

That dedication landed him the job, and it wasn’t long before he was the top salesperson at his branch.

Yet Nicola didn’t remain at MetLife long. After feeling restricted in his ability

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to service all of his clients’ needs, he moved to an independent firm and was eventually recruited to join the Rogers Group, where he began to round out his services.

“A friend and I created a subset called the business and estate planning group,” he

they are all individual silos,” he says. “They are all working under this compliance umbrella, independent of each other, not a single entity.

Rogers Group was the same – everyone had their own clients and practices. We basically shared expenses.”

“I wanted to create a model where the clients of the firm were owned by the firm, and the people working at the firm were shareholders, but not owners of clients.

That’s what we built at Nicola, and it’s still a rare model in the industry” says. “Our focus was working with business owners, doing financial and estate planning.”

That would lay the foundation for Nicola’s focus down the line. He evolved from insurance to retirement planning, to stocks and mutual funds. Yet, after a decade in the business, during which he rose to become president of Rogers Group, one thing he noticed was the lack of cohesion in the industry.

“No matter how big the organization – they can have hundreds of advisors – basically

Breaking with tradition When he decided to strike out on his own and create Nicola Wealth in 1994, Nicola did away with those silos.

“I wanted to create a model where the clients of the firm were owned by the firm and the people working at the firm were shareholders, but not owners of clients,” he explains. “That’s what we built at Nicola, and it’s still a rare model in the industry.

Most advisors will say they own their book

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PROFILE Name: John Nicola Title: Chairman and CEO Company: Nicola Wealth Based in: Vancouver Years in the industry: 46 Awards: Named Canada’s Most Admired CEO in 2016, BC CEO of the Year in 2015 by Business in Vancouver and EY Entrepreneur of the Year in 2011

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PEOPLE

INDUSTRY ICON

of business; they can take it and put it under someone else’s umbrella. Here, you can leave and sell your shares, but clients remain owned by the company. It’s a model that has worked for us.”

The uniqueness of the model doesn’t end there. Nicola Wealth currently has 42 licensed advisors and 22 asset managers. The advisors are dedicated to the clients, while the asset managers, who specialize in three areas (real estate, public and private assets), create portfolios to meet the needs advisors identify when working with clients.

“There is a high respect among the asset managers for what everyone else brings,” Nicola says. “They meet on a regular basis with advisors. Managers are focused on the

on a regular basis – that is the primary job of the advisors.”

Ahead of the curve One of Nicola’s biggest challenges and successes in his 46-year career came in 1999, when he made the decision to transition the business to a fee-based model. It was something quite rare at the time, but it paid off in spades.

“Making the transition was a jump into the unknown,” Nicola says. “Only a few firms had done it; there was no model to look at. In hindsight, it was the best decision and drove our growth.”

Nicola notes that in the firm’s first five years, it was growing between 7% and 8%

“Making the transition [to fee-based] was a jump into the unknown. Only a few firms had done it; there was no model to look at.

In hindsight, it was the best decision and drove our growth” best mix for the portfolios we are trying to build. Even though many of the advisors are licensed as portfolio managers, my view has been that the best thing they can do for clients is the planning and servicing.”

Planning has been at the heart of Nicola’s approach since his days with the Rogers Group. “Our thinking is almost a little mechanical,” he says. “When we sit down with clients, the first thing we do is planning. We gather information; we understand their tax situation, corporate structure, net worth, objectives, retirement goals, legacy and children. We do all of that before making any investment or insurance recommendations.

We have a significant amount of knowledge about them and their objectives. Then everything on the investment side is made to fit the plan. That plan is reviewed and updated

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NICOLA WEALTH

BY THE NUMBERS

annually. After the transition, that number jumped to 20%. Even recouping the losses from commissions didn’t take as long as Nicola thought. He planned for a three-year period, but the firm made them up in just 18 months.

Today, Nicola looks back on the transition with great fondness, as it has led to 25 successful years. Nicola Wealth continues to grow – its AUM recently surpassed $7 billion, and it now has offices in Vancouver, Richmond, Kelowna and Toronto as it tries to spread its model across the country.

“We think this is a better model to deal with the marketplace,” Nicola says. “Our view with other growth areas is that if we can get the right people on the ground, we believe our model will attract a reasonable share of the marketplace.”

1994

Year founded

$7.1 billion

Current assets under management

2,600

Number of families Nicola Wealth serves

42

Number of licensed advisors

22

Number of asset managers

4

Times Nicola Wealth has made Deloitte’s Best Managed Companies list

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UPFRONT

OPINION

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

Good things in small packages With markets in turmoil, now is the time to unearth small-cap stocks with attractive valuations, writes Don Walker MEGA-CAP STOCKS in the US have become a safe haven for investors around the world. Until recently, money has continued to pour into large-cap, index-tracking ETFs, pushing the indexes to all-time highs.

However, as the trade continued and valuations became bloated, risk was becoming underappreciated. Then came coronavirus and the fastest 10%-plus correction in history.

As we know, volatility creates opportunities. Although we don’t know for certain what the long-term impact of COVID-19 on the markets will be, the shakeout has the potential to create opportunities. As stock pickers, this is exactly what we’re looking to do: roll up our sleeves and find those great opportunities.

One area of the market that has our attention is small caps, especially in Canada. They have largely been out of favour for the past five years as investors assumed a recession was imminent. More than 70% of the stocks on the TSX Venture Exchange have a market cap of less than $300 million, and most investors have avoided the space in favour of larger-cap stocks and passive products.

Contributing to the low following in small-cap stocks is the lack of analyst coverage from sell-side research firms. With low trading volumes, many firms have decided to discontinue coverage of small-cap stocks in Canada. Because of this, anyone looking to invest in a small-cap stock must dig deeper to uncover opportunities.

A disciplined, active stock-picking approach can unearth great businesses trading at attractive valuations. But this requires investors to do their own rigorous, bottom-up analysis.

The reward is the potential for compelling returns gleaned from combining longer-term growth with multiple expansion.

The greatest challenge with small-cap investing is getting to know the companies you’re looking to invest in. Identifying the companies that will succeed – and ultimately realizing the return potential that small caps offer – often means meeting management and performing a long-term due diligence process.

Second, we look for deliberate conservatism, which is often a byproduct of high insider ownership, born out of the desire not to put the company at risk. These companies can be criticized at times for being too conservative, but under-leveraged balance sheets allow them to perform better through economic cycles. They often have a net cash position, which allows them to deploy capital counter-cyclically. With a well-maintained balance sheet, they can look to invest or acquire at the bottom of the cycle, when things are much cheaper.

Third, does the company have a long runway of repeatable growth embedded in its strategy? While this is important for any asset class, it is particularly crucial for a small cap. As the company grows from micro- to small- to mid-cap, the liquidity generally picks up and the multiples expand as larger pools of capital recognize the company’s merits.

Multiple expansion can prove more powerful in contributing to shareholder returns than actual earnings growth.

Overlooked and unloved, Canadian small caps have waited patiently on the sidelines for

“Overlooked and unloved, Canadian small caps have waited patiently on the sidelines for investors to take notice again” The ideal outcome is to identify a company that can evolve from being an overlooked small-cap name to a more widely followed company.

There are no guarantees in investing, but there are common threads among these ‘ideal outcome’ companies. Over years of investing in small-cap companies, we have found a few key predictive attributes that have led to better outcomes.

The first of these is high insider ownership. When managers have placed a meaningful portion of their own net worth in their company, they tend to run the company more like an owner than a caretaker. We often find them to be more disciplined about capital allocation, as opposed to spending cash just to grow. They tend to be better stewards of shareholder capital and more closely aligned with shareholders’ interests.

investors to take notice again. Buying opportunities existed long before the COVID-19 outbreak, in large part because investors have been able to find growth at the top of the markets. But if the selloff at the end of February has shown us anything, it’s that for all their strength, US mega-caps are not impervious to risk, and index-tracking ETFs might not be the easy ride to growth they once were. Maybe it can also serve as a reminder that, despite all the recent trends to the contrary, good things do still come in small packages.

Don Walker is a portfolio manager at PenderFund.

He joined the firm in November 2019, having spent the previous nine years managing small- and micro-cap equity strategies for an investment firm in Calgary.

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SPECIAL REPORT

HOLISTIC WEALTH MANAGEMENT

THE HOLISTIC APPROACH WP looks at seven strategies advisors can use to round out their services and add more value for clients

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ADDING AND demonstrating value have become necessary concepts for advisors, who can no longer rely solely on a talent for picking securities or a track record of returns. Those elements of wealth management matter less to today’s clients because they can do these things in much more cost-efficient ways via online trading platforms and robo-advisors.

So how can financial advisors remain relevant? The answer lies in what they can do for clients beyond just investments. Rather than “What company should I invest in?”, clients today want answers to questions like: “Do I have enough money? Have I saved

enough for retirement? What will I keep at tax time? Will I be OK?” That’s why WP sat down with seven successful advisors to find out what services they’ve added to their repertoire to bring more value to themselves and their clients – things like financial planning, tax services, retirement planning, insurance, legal services and communication with multiple generations of clients. Those who shared their strategies with WP offer case studies for ways other advisors can add these services to demonstrate their value to clients and ultimately make their practices better.

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STRATEGY #1

MAKE FINANCIAL PLANNING THE CORNERSTONE THE MODEL of the advisor as a stockbroker or mutual fund salesperson are in the past.

For advisors to survive today, they need to show clients that they can add value, and the primary way to do that is by offering financial planning as the cornerstone of their services.

Through financial planning, advisors not only enhance their relationships with clients, but also offer ways for clients to get more from their finances.

“Financial planning is a critical differentiator for advisors,” says David Barnsdale, vice-president and associate portfolio manager, wealth advisor and financial planner at RBC Wealth Management. “I think it’s important for advisors to offer financial planning to clients in order to educate, inform and help them understand the entire wealth management process, including investing, so that they’re comfortable. It also helps advisors better understand their clients’ goals and objectives. It’s critical to know those goals and objectives and what’s important to the entire family, and to understand if there are any concerns or challenges the family faces.”

Barnsdale adds that simply managing investments means you don’t truly know your clients and have no real relationship with them. Developing a plan takes the relationship to another level and is the value-add that a good advisor brings to the table.

When it comes to developing the plan, Barnsdale says it should encapsulate a client’s entire financial picture: saving and investing for the short, medium and long term; debt repayment; good debt versus bad debt (creating debt with interest that’s tax-deductible versus non-deductible); insurance and risk management (including death, disability and critical illness coverage); tax

CERTIFIED FINANCIAL PLANNERS BY THE NUMBERS GENDER

LOCATION

1%

Other

69% Male 31% Female 14%

Alberta

20%

British Columbia

AGE

8%

5%

Prairies

52%

Atlantic Canada

Ontario 32%

TOP EMPLOYERS OF CFPs 27%

RBC

22%

IG Wealth Management 10%

9%

Younger than 35

35-44

45-54

55-64

65+

CIBC TD Source: FP Canada

planning and tax-efficient investing; retirement planning and creating a tax-efficient income stream in retirement; and estate and will planning.

By understanding these elements, Barnsdale says advisors can create a plan that prioritizes financial goals and objectives, organizes the client’s finances, saves for a rainy day, and creates a long-term retirement strategy. “When the client worries less about money, they feel better about themselves, and at the end of the day, they are less stressed when they have that plan,” he says.

When crafting a plan, Barnsdale relies on a six-step process that begins with determining the client’s current financial situation through fact-finding and data-gathering.

Next, he identifies the client’s goals, needs,

and objectives and identifies the appropriate financial strategies necessary to achieve them. His team uses that to develop and prioritize recommendations and compile a presentation that allows the client to make informed decisions. The final step is to implement the plan and create responsibilities for both the client and advisor.

In order to accomplish these steps, Barnsdale notes that it’s important for advisors to go beyond the standard knowyour-client (KYC) regulations. “You have to use risk profiling tools to help understand a client’s risk profile and to educate the client about risk versus loss of capital,” he says. “Once you do that education and build portfolios to reflect a client’s risk-adjusted returns profile, it creates what we like to call

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SPECIAL REPORT

HOLISTIC WEALTH MANAGEMENT “When the STRATEGY #2 client worries HELP CLIENTS less about money, BECOME MORE they feel better about TAX-EFFICIENT themselves, and at the WHILE MANY advisors like to tout high returns, the Shinder Tremblay Group at end of the day, they Echelon Wealth Partners likes to say, “It’s just what you make, but what you keep.” are less stressed when not That has become the practice’s motto as it has evolved its services to emphasize tax they have that plan” David Barnsdale, RBC Wealth Management the ‘sleep at night factor.’”

The benefit for Barnsdale is deeper relationships with his clients and their families.

“When you understand them, their needs, goals, and objectives, it creates a sense for the client that the advisor knows them and is looking out for their best interest,” he says.

“Investment advice is only one aspect, but financial planning encompasses it all.”

The plan does makes it easier for advisors to build their client’s investment portfolio, and the inclusion of financial planning tools allows advisors to offer projections for different scenarios. “The plan is the blueprint for how and why we invest to achieve goals and objectives,” Barnsdale explains. “A plan also illustrates the impact of returns, inflation, taxes, etc. In many cases, we can use very conservative assumptions to see if goals and objectives are achievable.”

As the industry moves forward, Barnsdale believes that financial planning will become table stakes – the value-add that all advisors must include. “I think it will become more prevalent as the industry continues to move towards a greater focus on client experience,” he says. “Investments are becoming commoditized, and so you need to offer more. Today, clients are not paying for investment selection; they are paying for advice and planning.

That is becoming the true value-add and a distinctive feature moving forward.”

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efficiency, something that VP and portfolio manager Nick Shinder believes more advisors need to offer.

“Part of the client experience comes down to what is left in their pockets,” Shinder says.

“From a holistic approach, the more we find out about clients, the better we can recommend strategies and products that will be beneficial to them. Simply paying attention to where certain investments are allocated and what types of investments are used can lead to a more tax-efficient approach, rather than allocating haphazardly.”

Shinder explains that when it comes to tax, knowledge really is power. The more his team knows about a client’s situation – for example, if they have a real estate holding that generates revenue, a corporation or a working spouse – the better they can match the client to specific strategies that maximize tax efficiency.

The information advisors need to know to achieve that tax efficiency goes beyond the standard KYC requirements, Shinder says, adding that an advisor needs to be aware of all sources of income, what other professionals the client is working with and what strategies those professionals have put in place. “That’s how we can determine if a strategy is right for a client,” he says.

Shinder also notes that paying attention throughout the year is important. From crystallizing capital losses where applicable to offset taxable gains, to informing a client’s accountant about the total taxable income

to date, to being able to suggest a donation in kind, the benefits of staying in touch are numerous.

The strategies the Shinder Tremblay Group uses are designed to maximize efficiency by reducing, deferring or sheltering tax. “Corporate class funds, which are offered by several mutual fund companies, have been able to make something good out of the crash of 2008,” Shinder explains. “These funds allow a company to forgo distributions until they deplete the losses of that period and utilize their expenses to offset as much income as possible, so get in while you still can. There are also individual pension plans, which could work for a business owner, allowing them to put more into the RRSP-like structure and shelter more of their income.

“Then there is the tried-and-true flowthrough shelter, issued by mining companies in Canada, specifically in certain provinces

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THE MORNEAU REFORM ON PASSIVE INCOME This controversial tax change, introduced by Finance Minister Bill Morneau in the 2018 federal budget, targeted operating companies with $500,000 or more of active income and passive income between $50,001 and $150,000. The problem: Every dollar of passive income above the $50,000 threshold reduces the amount of operating income at the small business tax rate by $5. The result is that those extra revenues will be taxed at the following rates: Interest income will have the equivalent tax rate of 112.67%

Dividend income will have the equivalent tax rate of 100.83%

Capital gains will have the equivalent tax rate of 56.34% Source: Lapointe Rosenstein Marchand Melançon Law Firm

“As clients become more educated and they understand what is involved, they are going to ask why their advisor isn’t doing [tax planning]” Nick Shinder, Shinder Tremblay Group, Echelon Wealth Partners that offer higher deductions, depending on flow-throw issuance. When it comes to this, consulting with a client’s tax professional is paramount. The saying ‘too much of a good thing is no longer a good thing’ is poignant.

Purchasing too much on behalf of a client could result in hitting alternative minimum tax, and if you did that, the extra dollars in the strategies would be an inefficient use of money. Finally, there are insurance strategies that should be considered as a potential

shelter of income tax in the future.”

Shinder feels the strategies his team employs are vastly underutilized by many advisors, which could be a detriment down the road. “Some advisors say it’s not their department – they just focus on the investments and aren’t looking at it from a holistic view,” he says. “As clients become more educated and they understand what is involved, they are going to ask why their advisor isn’t doing it, and that makes those advisors vulnerable.”

Education is a big part of tax planning, and with every federal or provincial budget, there is the possibility of a rule change.

Shinder says it’s not an easy area to stay on top of, but keeping up to date is crucial if advisors are going to offer tax planning.

“When the last major changes happened to the budget, we went to conferences and talked to accountants and tax lawyers to figure out how the changes would be implemented and what it meant,” he says. “You need to stay on top; otherwise, all the work you do is for naught. We spent a lot of time learning because it isn’t our first role, but you take time to learn it for the benefit of the client.”

So far, the work has made a big difference for the Shinder Tremblay Group – the tax strategies have been a significant value-add to the practice. “Our clients understand that by aggregating their assets with us and sharing as much information as possible,” Shinder says, “we can give them a better experience and increase their after-tax return.”

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SPECIAL REPORT

HOLISTIC WEALTH MANAGEMENT

STRATEGY #3

SPECIALIZE IN RETIREMENT PLANNING THERE’S A difference between an advisor who helps clients save for retirement and one who creates a retirement plan. For Matthew Rodier, portfolio manager and certified retirement specialist at Rodier Asset Management at TD Wealth, it comes down to the fine details: understanding an individual’s priorities and taking them through the many stages of life to reach their goals.

“I look at priorities like estate planning, investment performance, passing on a family cottage to children, a variety of things,” Rodier says. “They all lead towards education and planning overall.”

For Rodier, it’s important to show clients

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that he’s an expert in his field, but that he also has the resources to surround them with experts in other areas. That way, his clients see that his team can support them through different life stages.

“Those are the main differences between someone focused on the investment side and planning for retirement,” he says. “I would want a provider who is integrated, has expertise and has all the services I need in-house.”

With any plan, Rodier says it’s key to get a lot of information and buy-in from the client; otherwise, the plan will not succeed. “It starts with understanding the client’s situation – their personal information like age, citizenship, residency, marital status, family dynamic, how many kids they have, employment, income levels, how long they expect income levels to remain, income sources, insurance coverage and if they are incorporated,” he explains. “From there, we ask about their estate plan, wills and mandates. That’s the core information. Then we can deliver a plan.”

Once he has that information, Rodier can begin his award-winning process, the primary goal of which is to show clients different paths and answer their questions.

“Priorities become the focus of the plan, which will articulate assumptions based on everything from inflation to the rate of return expected for different asset classes,” he says. “Based on those assumptions, we outline their current financial position, typically a net-worth statement, then a multiyear cash flow from the information – a bit of a projection.”

Rodier goes beyond the standard projection to show clients the evolution of their net worth across multiple scenarios. He starts with a best-case scenario, then begins looking at alternate versions. That could mean drops in investment performance, early retirement, late retirement or a need to use savings to pay for medical expenses.

“There are many ways we stress-test a portfolio to show how it affects their longevity

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While crafting and executing a solid plan are certainly major components of the process, Rodier notes that his team’s job doesn’t stop there. He also feels it’s important for advisors to manage their clients’ emotions through every life stage.

“It is incredibly important because it shows the quality of your entire services versus just executing on the investment side – you have to have both,” he says. “To coach clients through emotional ups and downs is something I feel privileged to do. They look at me as if we are connected beyond an advisory relationship.

It’s more of an extension of their family.”

Rodier’s approach has earned him a reputation as a skilled retirement planner, which he says adds value to all of his clients – not just those who seek him out for it.

“What’s interesting is that some clients come to us and want it right away,” he says.

“Others come for the investment expertise, and introducing them to the planning is sometimes an uphill battle. They don’t recognize the value at first, but once we get their buy-in and show them it’s what we do at no

“To coach clients through emotional ups and downs is something I feel privileged to do. They look at me as if we are connected beyond an advisory relationship” Matthew Rodier, Rodier Asset Management, TD Wealth from a financial perspective,” he explains.

“Sometimes there are strategies we recommend, like an estate freeze or an insurance strategy through a corporation, to show the effects in alternate scenarios.”

This is the area of the plan that Rodier and his team spend the most time on. Afterwards, they get into everything from basic investments to complex tax strategies. Once that’s complete, they have a task list and timeline because “a plan is only as good as the people executing the items,” Rodier says. “We make sure to execute on plans with clients.”

additional cost, they see the potential to uncover lucrative opportunities.”

That has ultimately strengthened Rodier’s relationships with his clients. “I have never gone through the process and had a client say, ‘Thanks, but I feel it’s a waste of time,’” he says. “All of them have come and said, ‘Thank you, this was enlightening and done professionally.’ We uncover opportunities, and everyone is appreciative of those opportunities, so I think it’s extremely valuable. We try to set them up for success, and they tend to value that significantly.”

KEY RETIREMENT PLANNING QUESTIONS

When do I want to retire?

What are my retirement income sources (government benefits, pensions, registered and non-registered investments)?

Will I have debts when I retire?

Will I have sufficient health insurance coverage?

Will I sell my home because I may not be able to maintain it, or will I need the sale proceeds to fund my retirement?

Will I be leaving a legacy for my children/grandchildren?

Will I be leaving a gift for charity?

Source: TD Wealth

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SPECIAL REPORT

HOLISTIC WEALTH MANAGEMENT STRATEGY #4

GET DEFENSIVE WHEN MANY people think about financial planning, they often think about the investment element – the part that Brian Burlacoff, an advisor at Sun Life Financial, refers to as the offense when he compares it to a hockey team. However, when a team is on the ice, Burlacoff points out, there are also elements such as the referee (a client’s legal affairs, such as will and power of attorney) and the defense (insurance coverage).

Burlacoff is a huge proponent of having a solid back end to a financial plan. That’s why he often asks his clients, “What if something happens when the offense is charging up the ice towards the goal?” A strong defense makes sure those goals are safe if an individual loses their source of income – an especially important consideration in today’s uncertain economic climate.

“There are a couple of things that can prevent an individual from earning an income,” Burlacoff says. “They could decide to stop working, they could lose their job, or they could get sick or pass away. In any of those situations, the goals that the offensive side of the plan have been working towards stop because they can’t be funded.”

Burlacoff uses the hockey analogy to help illustrate the importance of having that defense in financial plans. “The holistic approach comes in by helping clients save for those goals, but it also means making sure those goals are protected if there is an issue,” he says. “It’s about making people understand that the policy is there to protect the cash flow.”

There are three areas of defense that Burlacoff believes individuals need to be aware of: life, critical illness and disability insurance. “Ideally, a plan has all three elements,” he says. “If you take a 35-year-old couple, they are more likely to make a critical illness or disability claim before they are 65 than life insurance. So, in those situations, I even prefer a smaller life insurance policy, depending on other factors, in order to have

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“The holistic approach comes in by helping clients save for their goals, but it also means making sure those goals are protected if there is an issue” Brian Burlacoff, Sun Life Financial the critical illness and disability. Much like investments, it’s about diversifying because you don’t know if or how you could lose your ability to earn an income.”

Death, critical illness and disability can be tricky subjects to broach with clients, but Burlacoff says having these difficult conversations is part of providing holistic advice.

“A good advisor educates, not just sells

products,” he says. “We spend time talking to our clients about how these can create a safety net. We make sure we give them resources to learn more about the options. Then we create a budget and a tailored plan to get the options in. We realize it may not be possible at first, but that is the nature of planning, and it’s important to figure out how to get all three components in place, whether it’s in a month

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STRATEGY #5

THE IMPORTANCE OF CRITICAL ILLNESS COVERAGE

ASSIST WITH LEGAL AFFAIRS

2 in 5 Proportion of Canadians who are expected to develop cancer

57% Cancer survivors who have had to reduce their hours at work, change their role or quit entirely

400,000 Canadians who are living with a long-term stroke disability

$33 billion Annual combined medical and lost earnings cost of dementia

90%+ Percentage of Canadians who will survive a heart attack if they make it to the hospital Source: CanadaLife.com

or two or three years.”

Burlacoff says the defensive aspect of financial planning sometimes gets overlooked, depending on how advisors choose to specialize. “Some prefer to work on investments; others on insurance,” he explains. “If a client comes into my office and asks why they should work with me, I say it’s because I look at them holistically – a full picture.”

For Burlacoff, that means figuring out what the client wants their retirement to look like, how to get them there and how to protect them if something happens along the way.

While putting money toward the defensive side of a financial plan can be a tough sell to clients who would prefer to focus on the offensive elements, Burlacoff does note that critical illness policies can have a rider placed on them that allows clients to cancel the policy after

a specific period and receive their premiums back. A similar rider also exists with disability insurance, but he cautions that it should be used more sparingly.

Burlacoff says the defensive side of financial planning comes down to protecting your work. “If you have a client that you’ve worked with for 15 years, who has been a five-star client and has done everything as they should, and they get to 52 and get cancer or have a stroke – anything that prevents them from earning an income – and they do not have proper disability/critical illness coverage, then that 15 years of savings falls apart.”

That’s why Burlacoff asks clients the big questions around all areas of their financial plan – not only does it provide much-needed benefits to his clients, but it also allows him deliver a truly holistic approach.

WHILE IT’S important for individuals to have their own legal professionals, this is another area of a client’s financial picture where advisors can get involved. Not only can advisors confer with legal professionals and serve as a resource to refer clients, but they can also help with the financial side of legal issues. Areas such as co-habitation and prenuptial agreements, wills and power of attorney, and settlements and severance packages all present another opportunity for advisors to add value.

“I think one of the things that advisors can get involved in is being the person who helps their clients by championing those conversations because it’s a point of vulnerability – and to be holistic, you need to have those conversations,” says Jackie Porter, a financial planner at Carte Wealth Management.

Porter adds that it’s important to have difficult conversations about things like prenuptial agreements and estate plans when everything is going well; that way, if things do take a turn, everyone is on the same page.

“These are difficult conversations to have on your own with family, parents, a partner and children,” she says, “so I really see my role as a conduit to helping bridge that communication between all parties.”

Porter says a sound financial plan should address asset growth in both best- and worstcase scenarios. Asset growth will clearly change if relationships change, a partner dies or there is income interruption due to illness or disability. An advisor’s ability to facilitate these conversations in advance provides value for clients and their lawyers should these situations come to fruition. Porter says having a plan in place means everyone knows who to turn to, and advisors can start working with other professionals to handle the situation.

One area where this is pertinent is divorce.

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SPECIAL REPORT

HOLISTIC WEALTH MANAGEMENT

HAVING THE DIFFICULT CONVERSATIONS A recent study by FP Canada and Leger found that money is still a taboo subject for many, making it even more crucial for advisors to initiate tough conversations.

23% “The days of having conversations with our clients where we just talk to them about products are over. We must be prepared to have more rich conversations” Jackie Porter, Carte Wealth Management Porter says advisors can help individuals going through a divorce understand the financial implications of legal matters.

“Financially preparing clients gives them an opportunity to take stock of what they have and what they don’t, like an insurance policy, how their cash flow will change after a divorce and how to mitigate the financial impact,” she says. “You also need to remind clients to change their will after a divorce since it becomes invalid.”

The bottom line, Porter says, is that clients need to understand what the advisor’s role is in a divorce. Advisors need to be clear on what they can do for clients as a neutral third party, helping them understand their options and working with their lawyers to get them financially organized.

Another area where Porter regularly helps clients is with wills. As individuals go through life changes, those changes can affect their will, and that’s something advisors need to be aware of.

“If you divorce, your will is invalid, so you need to update it,” she explains. “Or if an executor of a will passes away, that too can have financial implications. If you have children and you go through a divorce, and you decide

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to appoint a new guardian for your child, that affects your long-term plan. If something happens to you, you may not want the funds to go directly to them; you may want to set up a trust. So, there are many things throughout your life that may need to be revisited in a will that have implications on your financial plan.”

Porter also says advisors can step in to offer guidance on severance and settlements when a client loses a job. She says the first thing to determine is what the individual plans to do.

If they’re looking at retirement, an advisor can help them maximize the tax efficiency of the severance. If not, an advisor can help them figure out how to budget without regular cash flow and create an interim plan. That can also include things like what to do about their mortgage, insurance, and moving or keeping a group RRSP. “Those are some of the major questions I find people ask me around severance,” Porter says. “They really want advice – it’s a major life change to lose your job and have to figure out what your plan is. It’s a crucial time when an advisor can be of value to their clients.”

Whether it’s planning before a marriage, drawing up a will or navigating a job loss, such legal events can have serious financial impli-

of Canadians said talking about money makes them uncomfortable

27% of women said they’re uncomfortable talking about money

18% of men said talking about money is uncomfortable

39% of Canadians who earn $40,000 or less regularly talk to their spouse or partner about money

72% of those who earn $80,000 or more feel comfortable talking to their spouse or partner about money Source: The Discomfort Index, Leger/FP Canada

cations, which is why Porter believes advisors can add tremendous value by initiating these often difficult conversations.

“We as advisors need to get the message out to people that they need to take responsibility for their finances,” she says. “We’re here to be a resource, to help them understand what the implications are if they don’t take responsibility and what their options are. The days of having conversations with our clients where we just talk to them about products are over. We must be prepared to have more rich conversations. They may be taboo subjects, but championing the conversations is how you build trust because these are the things people care about.”

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STRATEGY #6

CATER TO MULTIPLE GENERATIONS RIGHT NOW, Canada is in the middle of the largest wealth transfer in history as the baby boomer generation passes its wealth to millennials – and it’s only going to intensify in the next 10 to 15 years. It’s an area that advisors can’t afford to ignore, says Robin Muir, a financial planner and managing partner at Hatch & Muir.

“One of the questions we are asked [when someone inherits money] is, ‘What should I do with this newfound wealth?’ It really takes careful planning to determine the best way to allocate. Many times, people just want to pay off the house. But with mortgages below 3%, it may not be the most effi-

cient thing to do if you have carry-forward room in your TFSA or can gain more tax deductibility from contributions to your RRSP. Tax planning is very important when it comes to wealth transfer, and having some diversification [with that capital] to provide

for advisors to understand their clients’ comfort level in disclosing information about assets to children.

“Sometimes there is a generational gap, and parents don’t have that comfort level,” he says. “Typically, if the children are in the

“Often there are barriers. A lot of times parents didn’t talk money with their parents, so it can be hard to have that conversation with younger generations” Robin Muir, Hatch & Muir income, support retirement and also pay a mortgage might be better than putting it all against debt.”

Specializing in wealth transfer and multiple generations of clients requires a lot of planning. Muir notes that it’s important

meeting, it makes the most sense in planning to maintain the assets. But we work intergenerationally so we have a working understanding of the family dynamic and can help transition efficiently. It is a candid conversation, and often there are barriers. A lot of

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SPECIAL REPORT

HOLISTIC WEALTH MANAGEMENT

CANADA’S GENERATIONAL WEALTH TRANSFER The wealth transfer expected over the next five years highlights how important it is for advisors to reach out to younger clients by exploring new ways to communicate and share information with them.

TOTAL WEALTH TRANSFER $800bn

$751 billion

$700bn $600bn

$509 billion $500bn $400bn $300bn $200bn $100bn $0

2016– 2025

2006– 2015

Source: CIBC Economics, National Post

times parents didn’t talk money with their parents, so it can be hard to have that conversation with younger generations. You have to take time and make sure the client is comfortable having the conversation.”

Understanding the family dynamic is one element of creating a plan for wealth transfer, but another is determining what the clients

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want to do with their funds.

“Do they have philanthropic wishes?”

Muir says. “If you look at the tax liabilities to transfer funds, incorporating charitable giving rather than paying a large tax bill can be an option, as the charity gets those funds instead of the Canada Revenue Agency, and the beneficiaries still receive the same amount.”

Intergenerational planning extends beyond just preparing for a transfer. “You have to look at all the tools available to properly allocate resources,” Muir points out. “If there are children who may be going to post-secondary school or have a disability, it is a matter of setting up an RESP or RDSP to maximize efficiency. You really need to look at the cash flow coming in and delegate it accordingly so that all goals are met.”

One challenge many advisors have is figuring out how to communicate with different generations of clients. Muir’s team counters this with its holistic approach to intergenerational planning. By dealing with a variety of clients’ affairs and communicating all the professionals involved, Muir can make sure everyone in the family is on the same page. When it comes to younger clients, the team tries to peel back all layers and make sure all information is on the table to establish that communication level with them as well.

Muir believes planning for wealth transfer and dealing with multiple generations of a family is something all advisors need to do.

“I think it’s huge – it differentiates you from the robos, who are just looking for the lowest fee for transaction, compared to financial planning,” he says. “For us, we have gone so far as developing a financial organizer – hard copy and electronically – for all of our clients’ documents. It is all together, and we make sure everything is up to date. If it’s not, we refer them to the proper source. That is doing the full job – it’s value versus fee. As you get into complexities of someone’s life and financial affairs, it’s not just about trading stocks. It’s about advice and the value we bring to structure, planning and organization. That doesn’t come with the lowest fee; it comes with good-quality advice.”

STRATEGY #7

EMBRACE BRANDING AND COMMUNICATION WHILE MUCH of the value advisors can create comes from what they provide to their clients, there’s no denying the benefits that come from solid practice management. Things like branding, communication, marketing and technology can all enhance the services that advisors offer. But how does an advisor build a brand, and how can they communicate that brand to existing and prospective clients? For Rob Tétrault, senior vice-president and portfolio manager at Tétrault Wealth Advisory Group at Canaccord Genuity Wealth Management, technology has been the catalyst.

“If advisors aren’t thinking about integrating technology in 2020, they are behind,” he says. “More people are viewing websites from phones and spending more time on social media than traditional media. So it’s extremely important for advisors to explore how they can improve their presence on those mediums and their communication with clients using them.”

Tétrault’s approach was to build his brand on a strong digital presence, something he believes was missing in the industry. He has always had a media presence, but it wasn’t until he set goals across platforms such as YouTube, LinkedIn and Facebook to provide content to more investors that he was able to build the nationally recognized brand he now has.

“I gave myself a goal three or four years ago,” Tétrault explains. “We looked at all options of how we would build the brand and create content. It was largely due to my team members – I had the idea and the vision, but the implementation was all my marketing team and staff. We hired the right people, created good content and figured out how to get it out across channels.”

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ROB TÉTRAULT’S MEDIA ENGAGEMENT

BY THE NUMBERS The Tétrault Wealth Advisory Group has built a successful brand by leveraging social media, especially YouTube videos.

1,290 Number of YouTube subscribers

“I feel like you should be considering building a brand. Whatever that means for you, figure it out and build it” Rob Tétrault, Tétrault Wealth Advisory Group, Canaccord Genuity Having a solid brand is something Tétrault sees as much more important for advisors today. He encourages advisors to figure out their areas of strength and develop a brand from there.

“I think it’s a different battle for advisors now than an advisor in their 60s,” he says.

“When those advisors started, they were stock pickers, and it was about reputation. Now I feel like you should be considering building a brand. Whatever that means for you, figure it out and build it.”

Tétrault’s strategy revolves around creating content to engage more people through videos, podcasts, blogs and e-blasts. Once the content resonates, clients are directed to a landing page on Tétrault’s website, where they can learn more or engage with him and his team.

While Tétrault has created a strategy with many degrees of engagement, he says it doesn’t need to be that complex. “There are a lot of things advisors can do: webinars, events; I am active on social platforms creating content that will generate reactions,” he says. “If you are hosting events and not

all your clients can attend, an easy way is to record it, then push it through different channels. Using technology, you can vastly improve client communication and reach more clients with the message you want. There are so many media channels available, whether blog, mass mail, YouTube or podcasts. So there are many ways to reach people. You are missing out if you’re not using them because they are extremely cost-effective.”

Finding more ways to communicate with clients is something Tétrault believes is critical for advisors, especially given the diversity of today’s clients. “I think the idea that all millionaire retail clients in Canada are 60-plus is long gone,” he says. “We see so many young entrepreneurs who come into money, and then there is also the transfer of wealth. We are seeing a lot more high-net-worth clients who are millennials or on the cusp of being millennials. They want to consume their information in a much different manner than Mom and Dad. You have to be thinking of those individuals and embracing technology.

Doing that puts you at the forefront of gaining those individuals as clients.”

80+ Number of videos in the last year alone

7, 200 Number of viewers for the most-viewed video of the past year

57,000 Total number of video views Source: Tétrault Wealth Advisory Group

Tétrault considers himself fortunate because his firm has been supportive of his brand and social presence. But no matter how an advisor chooses to go about creating their brand, Tétrault stresses the importance of building one that reflects the individual and helps them reach more clients.

“It’s an area that advisors can’t afford to overlook, or they will be left behind,” he says.

“If there is a young advisor, for example, using these different channels, reaching your clients, delivering content that a client likes, which they consume on a regular basis, eventually the client is going to want to deal with that person. So, in addition to being left behind, there is a danger of losing clients or having unhappy clients.”

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SPECIAL PROMOTIONAL FEATURE

INFRASTRUCTURE

Finding sustainability in infrastructure Middlefield Group’s latest offering aims to give investors exposure to defensive asset class with a focus on sustainability

IN MARCH, Middlefield Group announced the latest addition to its fund lineup: the Middlefield Sustainable Infrastructure Fund, which provides investors with exposure to infrastructure investments through a sustainable lens.

“Infrastructure consists of long-life assets providing essential services to society, such as

oped or operated with attention to environmental, social or governance (ESG); economic; and political considerations.”

Middlefield created this fund based on its belief that sustainable investments can provide better risk-adjusted returns to investors and that capital will continue to flow to these assets. Lauzon says 80% of the fund

“The outlook for infrastructure is very strong, with a large portion of institutional investors planning to grow or maintain their infrastructure allocations” Rob Lauzon, Middlefield Group power, water and data,” explains Rob Lauzon, managing director and CIO of Middlefield Group. “It has stable and predictable cash flows, capital, regulatory and geographic barriers to entry, and low demand elasticity.

Sustainable infrastructure is assets devel-

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will be invested in Middlefield’s ‘best ideas’ in publicly traded sustainable infrastructure, which equals about 30 names. The remaining 20% of the fund will invest in high-quality infrastructure private equity, which is traditionally unavailable to retail investors due to

its high investment minimums and transaction complexity.

The fund’s launch was motivated by a recognition of the state of the economic cycle at the time. Lauzon acknowledges that investment returns will be harder to find in traditional assets and that the inherent attributes of infrastructure equities can be the answer to help investors meet their goals.

“The bottom line is that investors should be seeking infrastructure investments in their portfolios,” he says. “Asset allocations have been tilting toward defensive asset classes, with a larger portion of investors acknowledging that protecting assets is a higher priority. Real assets such as infrastructure are getting the most attention.

The outlook for infrastructure is very strong, with a large portion of institutional investors

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MIDDLEFIELD SUSTAINABLE INFRASTRUCTURE DIVIDEND FUND AT A GLANCE

TSX TICKER INF.UN (Reserved)

ALLOCATION 80% to publicly traded infrastructure companies; 20% to global infrastructure private equity

MANAGEMENT Active

planning to grow or maintain their infrastructure allocations.”

The sustainability element is another reason why Middlefield believes this fund is pertinent. “We took a sustainability angle because investors are increasingly demanding investments that reflect their personal and social values,” Lauzon says.

“That’s where we see some of the best opportunities in infrastructure. Many companies with strong ESG scores have outperformed the broader market. So it is our conviction that sustainable investments can provide better risk-adjusted returns.”

The fund invests in infrastructure companies and projects with long lives that facilitate essential services, which also have strong barriers to entry due to high capital requirements and extensive regulatory hurdles.

“We’re specifically focusing on three distinct infrastructure themes for the public allocation: power and renewables, water utilities and waste treatment, and data networks and communications,” Lauzon says.

As for the private equity component, Lauzon says it will likely focus on limited partnerships dedicated to core infrastructure in developed markets. Middlefield is targeting investments with reliable revenue streams that have a link to inflation and/or participate in economic growth, focusing on countries with established regulatory environments and stable governments.

In addition to the natural diversification that the private equity component offers, Lauzon says there are additional benefits for clients who invest in the fund.

“Sustainable infrastructure has a history

SUBCATEGORIES Power and renewables, water utilities and waste treatment, data networks and communications

FINAL PROSPECTUS Closed March 25, 2020 of generating higher yields and less volatility,” he says. “It will provide access to a strategy integrating ESG principles to better identify sustainable infrastructure investments, as well as access to institutional-quality assets through the 20% private sleeve. All of this is achieved in a closed-end fund structure.”

www.wealthprofessional.ca

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PEOPLE

ADVISOR PROFILE

A value creation mindset Bart Hunter has gone from professional hockey player to financial advisor and now also serves as a coach to other advisors, where his focus is squarely on teaching them how to add value

GROWING UP in Edmonton, Bart Hunter’s life revolved around hockey. He played major junior hockey with the Portland Winter Hawks and Regina Pats, and he was named MVP while playing with the Brandon Wheat Kings in the 1979 Memorial Cup. After four years in various professional leagues, Hunter made the decision to begin the next phase of his career, which eventually led him to the financial industry.

“I took business courses while I was playing hockey in the US,” says Hunter, a senior wealth advisor and director of wealth management at The Hunter Financial Group at ScotiaMcLeod. “I quit hockey at 23 and took a sales job, but finance always appealed to me.”

In his early 30s, Hunter took his first steps into the financial industry with a job at an insurance company, which he says laid a solid foundation for his current holistic approach to wealth management. He then joined an inde­ pendent investment firm, where he earned his mutual fund and securities licences. In 1996, he moved to a bank-owned dealer, where he remained for 16 years until 2012, when he and his team transitioned to ScotiaMcLeod.

Hunter has built his practice around the idea of creating value, something he also imparts on the advisors he now coaches. “If you help others get what they want in life, you

34

will get what you want in life,” he explains.

“You become indispensable to them. For us, we go above and beyond to help provide people with clarity and direction, which helps them build confidence in their future.”

Hunter’s focus on planning is one of the reasons he moved his team to Scotia Wealth Management. By using the firm’s resources, including a group of specialized wealth plan­ ners, he feels his team has been able to create a fully holistic approach.

“Our Value 360 process brings all of the resources of the Scotia Wealth Management team to bear for our clients,” he says. “Our team has tremendous bench strength, and our process ensures that we are efficient, prof­ itable and professional. It ensures that when we articulate our value to clients, we are able to carry it through and deliver a phenomenal client experience.”

Hunter’s client base is primarily made up

of affluent delegators, incorporated profes­ sionals, business owners and others, including doctors and farmers. With such a diverse group of high-net-worth clients, Hunter has instilled an institutional approach that inte­ grates alternatives into his portfolios.

“If you follow institutional portfolios such as the Canada Pension Plan, they have roughly 50% in non-liquid assets like real estate, alternatives, private equity and private debt. Sometimes I feel like our industry has an old-school mindset. We build portfolios differently from most other advisors. We feel investors really want to reduce volatility. If it’s good enough for the pension plans and endowments, we think it’s worthwhile for our clients and therefore are willing to put in the extra effort it takes to build these portfolios.”

While he’s had many career highlights, Hunter says the one that really stands out is the team he has built and the people who are

FROM PLAYER TO COACH After being coached throughout his hockey and business careers, Hunter was approached

by ScotiaMcLeod’s Saskatoon regional manager, who asked if he was willing to coach other advisors at the firm.

“I have always had an abundance mindset and am happy to help others with the knowledge and experience that I have developed over my career,” Hunter says. “We have developed one-on-one coaching for advisors, along with branch skill set development presentations.”

www.wealthprofessional.ca

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FAST FACTS: BART HUNTER

PRACTICE The Hunter Financial Group

FIRM ScotiaMcLeod

LOCATION Saskatoon, SK

“If you help others get what they want in life, you will get what you want in life. You become indispensable to them” integral to that team.

“Our culture is positive, innovative and creative,” he says. “Each team member is passionate about bringing their unique ability to the table, which allows them to have fun in their role and ultimately leads to betterquality work and high-value service for our clients. The ability to focus on roles that they like, rather than stretching themselves across a variety of tasks, adds to job satisfaction.

Our approach has proven to be an excellent way to generate ideas, solve problems and allow for personal growth.”

That mindset has been passed on to Hunter’s clients and is now reflected in his team’s growth in assets and onboarding of new clients. “I am now 60 years old, but I feel that I’m a better advisor now than I’ve ever been,” Hunter says. “How could I ever retire from what I love?”

YEARS IN THE INDUSTRY 28

PREVIOUS CAREER As a professional hockey player, Hunter won the 1980 WHL Championship with the Regina Pats and was named the 1979 Memorial Cup MVP for the Brandon Wheat Kings

www.wealthprofessional.ca

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SPECIAL PROMOTIONAL FEATURE

HOLISTIC WEALTH MANAGEMENT

The twilight of the stock picker Eleven years ago, advisor Doug Dahmer saw advice moving beyond pure investment management. He tells WP how he pulled off the move to a holistic model by establishing a winning partnership with Forstrong Global Asset Management WHEN DOUG DAHMER started as a financial advisor 28 years ago, the industry was a very different place. Advisors were ‘money managers’ – stock pickers who justified their fees by selecting the best investments for their clients. Tax and estate planning and client service took a backseat to finding the right stocks. After 2008, though, Dahmer decided to take a different path.

In the wake of the financial crisis, Dahmer, the CEO and founder of Retirement Navigator, saw the advisor’s old role as a stock picker falling by the wayside. He decided to use his skills in tax and estate planning – aspects of the job he enjoyed more to begin with – to fill a unique niche, managing the retirement incomes of a baby boomer generation that was shouldering the responsibility of the pensions their parents enjoyed.

In essence, Dahmer eschewed stock picking to become a holistic financial planner.

What that involved, though, was outsourcing the investment management work that was once the core job of an advisor. After a year of searching, Dahmer chose to partner with Forstrong Global Asset Management, and he hasn’t looked back.

“I had picked Forstrong because they already had established a strong track record of being able to protect on the downside,” Dahmer says. “My clients are far more interested in protection of principal than they are in top-end performance, and Forstrong

36

demonstrated that they had a very strong track record of doing that.”

Dahmer cites Forstrong’s performance in 2008: When markets were down 30%, Forstrong was down only 5%. By 2009, when most advisors and managers were still trying to trade themselves out of a very deep hole, Forstrong was already above water. For a retirement income planner like Dahmer, that’s the kind of partner he needed.

However, Dahmer still needed to convince

ment group that would see money flowing in and out at random. There was a strategy, a timeframe and a baseline plan behind what Dahmer was doing. That was enough to cement the partnership.

For Dahmer’s client base of retirees, Forstrong developed a sleeved system to ensure cash flow. Dahmer used his strong relationships with clients to provide his partners with expected spending numbers, which could be built into each of the invest-

“My clients are far more interested in protection of principal than they are in top-end performance, and Forstrong demonstrated that they had a very strong track record of doing that” Doug Dahmer, Retirement Navigator Forstrong that the partnership was worthwhile. At the time, Forstrong focused on high-net-worth clients and advisors with far more assets than Dahmer held in his book.

Dahmer sat down with Forstrong founder Wilfred Hahn and explained the sort of work he was doing and that his clients needed pension-like discipline in their asset management. Hahn realized this wasn’t an invest-

ment accounts and ensure that the clients’ spending needs would be met. Dahmer did what he did best: planning his clients’ retirement and maintaining his relationships with them. Forstrong likewise did what it does best: using smart tactical asset management solutions to deliver for advisors.

“This has been a symbiotic relationship, where they’ve been able to take the informa-

www.wealthprofessional.ca

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FORSTRONG’S ASSET MIX PROCESS

tion that we provide them and do a better job of money management than we could,” Dahmer says. “Because they are discretionary money managers, we have eliminated much of the consumer misbehaviour on the investment side, because if anybody starts asking me if their money is being invested properly, I tell them that neither my nor their investment expertise comes anywhere close to the people who are making the decisions.”

Dahmer was ahead of the curve when he partnered with Forstrong. The post-2008 era of passive investing and robo-advisors has forever changed the role of the advisor.

Now advisors need to find a unique planning niche and communicate their value to clients while outsourcing the money management to a firm like Forstrong.

When Dahmer transitioned his investment management to Forstrong, he had to define what he was doing to his clients. He believes most Canadians fail to fully understand what their advisor actually does, so his repositioning was a chance to communicate his value to clients. After he talked them through how he works with Forstrong and

The Forstrong investment team determines the relative desirability of major asset types by grading them according to 10 groups of criteria and conditions. Many factors influence the relative investment return prospects of global financial asset classes, and they are graded according to their favourability or hostility to the performance prospects for each.

Broadly, the graph below shows the relative influence of the factors surveyed in determining Forstrong’s asset mix policy.

10% Fundamental factors and conditions

15%

40%

Qualitative assessments Risk/return characteristics Quantitative ratings

35%

Source: Forstrong.com

the benefit they would get from his advice and Forstrong’s investment management, his clients were on board.

Today, Dahmer believes the stock-picking advisor is going the way of the dodo. The forces of change since 2008 have altered the industry so fundamentally that within the next five years, he thinks the advisors who

got into the industry to play stock picker won’t be around anymore.

“There’s no way they can survive with what technology is doing and what ETFs have done in growing the industry beyond the stock picker,” he says. “I’m at complete peace with that. In fact, I was quite eager and ready to give it up.”

www.wealthprofessional.ca

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THANK YOU FOR YOUR NOMINATIONS! Wealth Professional would like to thank its readers for the incredible response to the call for nominations for the 6th annual Wealth Professional Awards! It is great to see so many talented individuals, teams and organizations within the wealth management and financial planning industry who have excelled over the past year.

Finalists will be announced in Wealth Professional in April. Winners will be selected by an esteemed, independent judging panel and revealed during the highly anticipated black-tie awards gala on September 30 at the Liberty Grand in Toronto.

BE PART OF THE CELEBRATION!

For table reservations or sponsorship opportunities, contact events@keymedia.com

www.wpawards.ca #WPAwardsCA

SPECIAL THANKS TO OUR SPONSORS

SOCIAL MEDIA SPONSOR

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PRESENTED BY

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3 AM

PEOPLE

CAREER PATH

PIVOT MAN

Lorenzo Pederzani is no stranger to changing direction as new situations demand Always an involved student, Pederzani was approaching the end of his studies at McGill when a conversation with an ex-president of the University Students’ Society gave him a new target.

“He said I should run for VP of finance. I had never had that kind of ambition, but I thought why not? It was thrilling. I probably worked 70 hours a week. I came to work in a suit every day. The experience gave me the comfort that I could run a business.”

1998

WORKS IN STUDENT FINANCE

2002

1999

FOUNDS THE SUMMER SUNDAYS SOCIETY In the wake of 9/11, Pederzani came to the realization that “fun is not frivolous.” His group of friends would spend Sundays undertaking “random adventures” by throwing a dart at a map and going wherever it landed.

“When I returned to Vancouver, the lack of cultural vibrancy frustrated me. I started an outdoor movie night first and then founded the Summer Sundays Society. I supported myself with odd jobs for three years while building it.”

HEADS TO NEW YORK Post-university, Pederzani set out for New York City with the goal of nabbing a management consultant position.

“I ground it out for three months. I’d walk to the New York Public Library, research different management consultancies and draft cover letters. I did that for three months straight – I saved all my rejection letters and pinned them up on a wall of shame in my tiny little apartment. I was essentially throwing résumés into thin air – the lesson was to be more strategic.”

2010

PROVES HIS METTLE Recommended by an advisor friend to the Investors Group training program, Pederzani took his first steps into wealth management.

“I was very conscious of the fact that most rookies failed and knew that only about four out of my 25-person cohort would survive in the business; luckily, my training class roommate and I both did. To celebrate, we hike a different mountain in BC every summer and eat a bowl of Cup-a-Noodles on the summit and remember the struggle of the early days in the business.”

MOVES TO DUNDEE After running into a former IG colleague who praised his new company, Pederzani was inspired to move to DundeeWealth.

“I realized I wasn’t on the right platform to grow the high-end practice that I wanted to build. My first meeting with the DundeeWealth branch manager was great, but being an overly analytical person, I then did 120 meetings of research with 19 firms to decide on next steps – and still ended up moving to DundeeWealth.”

2019 ADDS A THIRD PARTNER A chance meeting at a social event turned into a lunch and culminated in the practice adding its third partner.

“He’s a missing piece on our journey toward building a multi-profession practice, like a light version of a family office. There is a market that is underserved, and we’re a team all humming the same tune to serve our clients”

2004

2012

MAKES A CRITICAL CONNECTION As his practice at Dundee grew, Pederzani started working with a junior associate, whom he hired to help out part-time. This gave rise to a friendship, which evolved into a business partnership.

“We had a kinship of personality and vision. It was a very organic alignment. I wanted to reconfigure my practice from being fee-based to being discretionary. Matt and I launched the Westmount Wealth Group in late 2015 with $25 million in AUM and have grown the business to $145 million today.”

www.wealthprofessional.ca

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PEOPLE

OTHER LIFE

1989

Year of Briglio’s red Porsche 930 Turbo Cabriolet, one of only 400 made worldwide

270km

Maximum speed Briglio has reached in his black 2007 Porsche 997 Twin Turbo

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

15

Years Briglio has been participating in the Father’s Day Show and Shine

The idea for the personalized plate on Briglio’s red Porsche ca me from his oldest son, who told his dad, “When someone takes a look at that car, the first thing they think is ‘Ooh, yah!’”

LIFE IS A HIGHWAY As a teen, he drove muscle cars; these days, Morris Briglio’s rides help him do good in the world A LIFELONG driving enthusiast, Morris Briglio, the Vancouver-based president of The Mortgage Advantage Financial Services, can often be found behind the wheel of one of his beloved Porsches. In addition to the driving, a large part of the joy Briglio derives from owning such eye-catching cars comes from the charity

40

work they allow him to carry out. Briglio’s local chapter of the Porsche Club of America holds a bi-weekly drive on the Sea to Sky Highway; every driver must make a donation the Shriners, which is then matched by the restaurant where the ride culminates.

But the highlight of the year for

Briglio is the club’s Father’s Day Show and Shine. “The people who come in to see the cars have the option of making a donation and choosing vehicle,” Briglio says. “They jump in the passenger seat, and [we] drive up to Cypress Mountain. I typically take the [red Porsche] and get chosen every year.”

www.wealthprofessional.ca

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WP al

CANADA

MAGAZINE The leading business magazine for financial planning professionals

WEBSITE Breaking news, in-depth profiles, features, online forum and opinion and analysis

ENEWSLETTER Daily news service delivered straight to your inbox every morning

Find out more and subscribe at wealthprofessional.ca WP all subs ad Life-SUBBED.indd 40-IBC_Other 2018.indd 1 41

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