Wealth Professional 6.10

WWW.WEALTHPROFESSIONAL.CA ISSUE 6.10 | $12.95

2018 YEAR IN REVIEW A look at the trends that defined investing in 2018 – and how they might impact the year to come

ADVISORS ON THE USMCA

What benefits does the new NAFTA hold for Canadian investors?

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A CULTURE OF COLLABORATION

How Richardson GMP CEO Andrew Marsh broke the mould of traditional wealth management

HEALTHY PORTFOLIOS

Why now is a great time to invest in the healthcare sector

27/11/2018 3:30:07 AM

Introducing

Exchange-traded series option for 3 active mandates IA Clarington Core Plus Bond Fund

IA Clarington Global Bond Fund

IA Clarington Emerging Markets Bond Fund

Limited duration, multi-credit approach with potential for enhanced yields

Unconstrained approach invests across multiple asset classes and geographic regions

Total return approach to emerging market debt combines top-down and bottom-up analysis

TSX: ICPB

TSX: IGLB

TSX: IEMB

Visit iaclarington.com/ETF to learn more about IA Clarington Active ETF Series.

Definition of terms: Bottom-up analysis – The process of analyzing and selecting securities based on their fundamental characteristics; Duration – Measures the sensitivity of fixed-income securities to changes in interest rates. A higher duration means an investment is more sensitive to interest rate volatility.

When interest rates fall (rise) a higher duration means a greater increase (decrease) in the price of the security; Multi-credit – An approach that invests in multiple types of credit instruments; Top-down analysis – An approach to investing that bases asset allocation decisions fully or partly on macroeconomic analysis and analysis of the broader markets; Total return – An investment return that includes any interest, capital gains, dividends and distributions; Unconstrained – An approach to investing that is not constrained by benchmark or other asset class weighting requirements. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing.

Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. The iA Clarington Funds are managed by IA Clarington Investments Inc. iA Clarington and the iA Clarington logo are trademarks of Industrial Alliance Insurance and Financial Services Inc. and are used under license.

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27/11/2018 4:18:35 AM

ISSUE 6.10

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

Responsible investing is here to stay

PEOPLE

42

PUTTING IN THE WORK

SPECIAL REPORT

22

THE YEAR IN REVIEW

From 0%-fee funds to cannabis stocks, Wealth Professional Canada takes a look back at the stories that shaped the investment world in 2018

Having launched his own independent practice, Elie Nour is now focused on mentoring the next generation of advisors

INDUSTRY ICON

Richardson GMP head Andrew Marsh explains why he’s put a priority on fostering a culture of entrepreneurship and collaboration

18

Is it time to get into or out of emerging markets?

07 Opinion

Investors enticed by FAANG stocks should proceed with caution

08 Statistics

Is oil’s recent drop just a blip on the radar or a harbinger of another crash?

10 News analysis

What the new US-Mexico-Canada Agreement might mean for investors

12 Intelligence

This month’s big movers, shakers and new products

14 ETF update

Why it’s OK not to follow ETF fads

44

16 Alternative investment update

How one private equity firm found its niche in buyout disputes

FEATURES

PEOPLE

06 Head to head

TAKING A TEAM APPROACH

How cultivating a team of specialists helped a pair of advisors take their practice to the next level

PEOPLE 47 Career path

A stint as a teacher made Dave Chellew a better advisor

48 Other life

Andrew Carnovale was born to coach, whether it’s investors or CrossFitters

FEATURES

46

IN GOOD HEALTH Investing in healthcare is key to building a robust portfolio

WEALTHPROFESSIONAL.CA CHECK IT OUT ONLINE

WOMEN IN WEALTH MANAGEMENT AWARD WINNERS, P36 www.wealthprofessional.ca

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27/11/2018 4:22:18 AM

UPFRONT

EDITORIAL

Becoming more responsible

P

roducts that fall into the category of responsible investing [RI] seem to be getting more and more attention from investors. A recent report from the Responsible Investment Association [RIA] revealed that responsible investments surpassed the $2 trillion mark for AUM in Canada in 2017.

Traditionally, much of the investment in the RI sector has come from institutional investors looking to minimize risk and improve returns over time by putting their money into companies with favourable environmental, social and governance [ESG] standards. Now this concept is trickling down to the retail investor. The growth of RI in Canada has been significant in the last few years.

Between 2015 and 2017, AUM was up 41.6%, and half of all assets under management in this country (50.6%) are now aligned with RI strategies. That means it’s

The growth of responsible investing in Canada has been significant in the last few years ... half of all assets under management in this country are now aligned with RI strategies becoming increasingly important for advisors to look for ways to offer responsible investments to their clients.

Including these options is no longer difficult. Many ETFs, such as the Evolve North American Gender Diversity Index ETF, offer access to RI strategies. Robo-advisors have also made it easier than ever to add RI products to portfolios. Most have already incorporated them to their suite of options.

ModernAdvisor, for instance, has a set of 20 pre-designed portfolios, 10 of which are socially responsible.

What’s driving this push towards RI? In an earlier report, the RIA pointed to millennials and women – both growing segments of the investor population – as groups who were more likely to incorporate RI options. But no matter what’s behind its continued popularity, responsible investing is something that advisors can no longer ignore – otherwise, you’re at risk of losing a new generation of investors who clearly value it.

The team at Wealth Professional Canada

wealthprofessional.ca ISSUE 6.10 EDITORIAL

SALES & MARKETING

Managing Editor Joe Rosengarten

Director, Client Strategy Dane Taylor

Editor Darren Matte Writers Libby MacDonald Leo Almazora James Burton Executive Editor Ryan Smith Copy Editor Clare Alexander

CONTRIBUTORS Kimberley Short

ART & PRODUCTION Designers Pia Marie Tandog Joenel Salvador Production Manager Alicia Chin Traffic Manager Ella Dayandante

Sales Executive Alan Stewart General Manager, 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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SUBSCRIPTION INQUIRIES

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

ADVERTISING INQUIRIES dane.taylor@keymedia.com

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

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

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

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

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The expenses ratings areallanmay objective, quantitative of a fund’s historical risk-adjusted relativeinvesting. to other Commissions, commissions, fees, and be associated with measure mutual fund investments.

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M O R N I N G S TA R C A N A D A M O R N I N G Strategic S T A R C ABond NADA Mackenzie Fund M O R N I N G Canadian S TA R C A N A D ATerm Income Fund Mackenzie Short Strategic Bond Fund Mackenzie Strategic Fund Investment Grade Floating Rate Fund CanadianBond Short Term Income Fund Mackenzie Canadian Term Income Fund InvestmentShort Grade Floating Rate Fund Mackenzie Investment Grade Floating Rate Fund M O R N I N G S TA R C A N A D A M O R N I N G S TA R C A N A D A Mackenzie Floating Rate Income Fund M O R N I N G S TA R C A N A D A Mackenzie Global Bond Fund FloatingTactical Rate Income Fund Unconstrained Fixed Income Mackenzie Floating Rate Income Fund Fund Global Tactical Bond Fund Canadian BondFixed FundFund Mackenzie Global Tactical Bond Unconstrained Income Fund Mackenzie Unconstrained Canadian BondFixed Fund Income Fund Mackenzie Canadian Bond Fund Also available: Mackenzie Floating Rate Income ETF Also available: Mackenzie Unconstrained Bond ETF Also available: Floating Rate Income ETF Canadian Short TermETF Fixed Mackenzie Floating Rate Income ETF Income ETF Unconstrained Bond Mackenzie Core Plus Canadian Unconstrained ETF Canadian ShortBond TermFixed FixedIncome IncomeETF ETF Mackenzie Canadian Short TermFixed FixedIncome IncomeETF ETF Core Plus Canadian Mackenzie Core Plus Canadian Fixed Income ETF

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ETFs | 1 year MUTUAL | (333MANAGED ASSETS Series F, Canadian Fixed Income category: - n/a starsFUNDS -0.2%, 3 yearsPRIVATE - 5 stars (407WEALTH funds) 2.1%,POOLS 5 years - 5 stars funds) 3.0%. Mackenzie Canadian Short Term Income Fund Series F, Canadian Short Term Fixed Income category: 1 year - n/a stars 0.8%, 3 years - 5 stars (193 funds) 1.8%, 5 years - 4 stars (148 funds) 2.0%, 10 years - 5 stars (53 funds) 2.8%. F,Mackenzie Grade Floating1 year Rate -Fund Series-0.2%, F, Canadian Term(407 Fixedfunds) Income category: - n/a(333 starsfunds) 1.8%,3.0%.

3 years - 5 stars Canadian (193 funds)Short 1.9%.

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Unconstrained Income F,1.9%.

High Yield Fixed 2.8%.

Grade Floating Rate -Fund Series F, Canadian Term Fixedfunds) Income category: 1-year - n/a(333 starsfunds) 1.8%,3.0%.

3 Fixed years - 5 starsFund (193 Series funds)Short Mackenzie Fund Series Canadian Short Term Fixed category: 1(312 year1funds) -year n/a stars 0.8%, 3 years - 5 stars (193 funds) 1.8%, 5F,years - 4 -stars (148(38 funds) 2.0%, stars (53Tactical funds) Income category: 1 year - n/a stars 1.8%,Income 3Rate yearsLoan - 4 stars Mackenzie Canadian Bond Fund Series Canadian Income category: 1years year- -5n/a stars -0.1%, Floating RateF, Income Fund Series F, Floating category: -5.3%. n/a stars 5.7%, 3 years - 5 stars (77 funds) 6.5%, 5 years 4Fixed stars funds) 5.2%.10Mackenzie Global 2.8%.

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Income category: 1 year - n/a stars 1.8%, 3 years - 4 stars (312 funds) 5.3%. Mackenzie Canadian Bond Fund Series F, Canadian Fixed Income category: 1 year - n/a stars -0.1%, 3 years - 4 stars (407 funds) 1.6%, 5 years - 4 stars (333 funds) 2.7%, 10 years - 4 stars (152 funds) 4.1%.

2018-11-09 3:34 PM 04-05_Mackenzie DPS.indd 5

2018-11-09 3:34 27/11/2018 3:33:08 AMPM

UPFRONT

HEAD TO HEAD

Should investors sell off emerging market stocks?

Emerging markets have taken a beating in 2018. Is it time to sell, or are advisors preaching patience?

Rob Tetrault

Ralph A. Nour Investment advisor Nour Private Wealth

President Oak Tree Financial Services

“We like to preach patience in times like this and like to look for value in times of correction. This is obviously an area that should be added to portfolios in moderation, depending on risk tolerance.

The good news now is that EMs are trading at roughly 11 times forward EPS, and contrary to past Fed tightening cycles, EM central banks are not responding to rate hikes to defend their currencies.

On the technical side, relative strength and momentum indicate that we’re not quite ready for the all-out turnaround in EMs, but overall we’re somewhat bullish for the future.”

“Increased trade tensions and tariffs have caused a drawdown on emerging market stocks. Seeing that emerging markets are trading at a 30% discount to the MSCI World Index, it would be unwise to sell. If anything, it’s a great opportunity to take advantage of discounted prices.

Coming out of the US mid-term elections, Trump will continue to seek resolution with China. As soon as global tensions quiet down, we should see money rotating away from the US to emerging markets.

Investors should keep in mind their time horizon and risk tolerance when rebalancing their portfolio rather than reacting to turbulence.”

“As an asset class with higher volatility than developed markets, we limit emerging market exposure to clients who have both a longer time horizon and more experience with the ups and downs of equity markets. If clients have an allocation towards emerging markets, we continue to hold or rebalance their portfolio to maintain the target weight.

The potential of increasing domestic consumption, a rising middle class and more economic growth than developed markets is compelling. However, due to the high correlation with Canadian equity markets, we increasingly prefer to gain exposure to these securities through a diversified global equity portfolio.”

Branch manager, SVP and portfolio manager Tetrault Wealth Advisory Group, Canaccord Genuity Wealth Management

Trent Stanley

THE BUYING OPPORTUNITY It’s been a rough year for emerging markets – investors bailed on such problematic countries as Turkey and Argentina and shied away from the possibility of spillover into other economies, causing the MSCI Emerging Markets Index to drop more than 15% throughout the year. However, emerging market expert Mark Mobius sees this as a prime time to buy. In a recent segment on CNBC, Mobius said that now is a good time to purchase “very cheap” stocks in countries such as Brazil, which has already begun to witness a rebound in both stock prices and currency value. “At the end of the day, emerging market equities look very cheap now,” Mobius said. “It’s time to get in.”

6

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27/11/2018 3:33:56 AM

UPFRONT

OPINION

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

Sinking into FAANGs Everyone loves a tale of rapid market gains, but these headlines often miss the real story, writes Kimberley Short A TEMPTATION many investors succumb to is focusing their attention on sectors that have risen significantly during the last several years or quarters. This is understandable because everyone loves a good story – and specifically, we love a story about gains in the stock market.

This is the case with FAANG (Facebook, Amazon, Apple, Netflix and Google) stocks.

These stocks have really delivered most of the gains in the US market over the last year, and the recent weakness in some of these stocks has attracted a lot of attention.

However, we have to be aware that financial headlines often miss the big story, and the attention paid to gains or losses in one sector ultimately amounts to recency bias.

Our job is to ensure that we steer clients away from potential hazards caused by this type of bias. Recency bias can cause a mania to set in, and although it can lead to some shortterm profits, it is rife with a history of casualties, particularly among novice investors.

One memorable example of recency bias is the banks that benefited from the US housing bubble that ended in 2007; before that, it was the dot-com mania in 2000. Short-term profits were made by early investors buying in at low prices when the companies had good value, but it became a game of musical chairs when valuations exploded and fear of missing out drove stock prices well above reasonable levels. The losers at the end far outnumbered the early winners.

Knowing when to take profits before the music stops is the hardest part. We

refuse to play these games and use a variety of tactics to ensure that our clients keep FAANG stocks and other sectors in proper perspective. Our portfolio management methodology requires that the underlying fundamentals of any stock have to be sound – which eliminates many of the FAANG stocks from consideration.

The discipline of actually taking profits as stock prices increase has gone a long

We are intrigued when investors fall deeper in lust with a company that has romanced us all with futuristic-feeling innovations, such as the promise of drone delivery of shopping purchases and food orders. It becomes easy to then regard the fundamentals of the company as unimportant and to ignore its volatility.

At the extreme, many investors no longer look at P/E ratios or dividend yields as a metric for analysis of a company; rather, sentiment and momentum indicators become the decision-making tools. Trying to time those extremes is fraught with danger.

We also recognize that Canadians investing in FAANG stocks face currency risk. Since 2016, we have seen the loonie stay relatively weak against the greenback, but we cannot forget that it was only as far back as 2008 that our dollar was above par. Any spike in inflation, any commodity shortage or any crisis in the capricious US political system could cause our dollar to rise just as the volatile FAANG stocks sell off.

Geographic diversification for Canadians remains a critical component of both risk

“Many investors no longer look at P/E ratios or dividend yields as a metric for analysis of a company; rather, sentiment and momentum indicators become the decision-making tools” way to smoothing returns. Yes, we have left money on the table, but we would rather be looking at cash in our hands as a stock we sold continues to rise than to be looking at a stock we own crash because we were hoping to squeeze out the last few pennies of profit.

The recent weakness in some of the FAANG stocks is only one factor, but it mirrors the weakness we saw in major US banks in early 2008. Even a 20% fall in price did not make these banks undervalued at the time – it just made them less overvalued, which turned out to be too true when that party ended later in the year. Fundamentals always matter, as does diversifying: buying out-of-favour, unfashionable stocks as a counterbalance.

management and yield realization. Overall, understanding our clients’ objectives for their portfolios is as important as the security selection criteria we use. For some, being weighted in these fast-moving stocks will make sense – as long as the clients, and we, keep in mind that FAANGs can bite.

HollisWealth® is a division of Industrial Alliance Securities Inc., a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. This information has been prepared by Kimberley Short, who is a CIM®, CFP® and a portfolio manager for HollisWealth. Opinions expressed in this article are those of Kimberley Short only and do not necessarily reflect those of HollisWealth.

Kimberley Short is an investment advisor with ShortFinancial who specializes in financial and insurance planning. She is insurance licensed and has successfully completed her CFP designation.

www.wealthprofessional.ca

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27/11/2018 3:35:02 AM

UPFRONT

STATISTICS

Don’t call it a comeback (yet)

BRENT CRUDE’S RISE AND FALL For most of 2018, the price of oil has risen significantly. Brent crude, a key international benchmark for measuring the commodity, fluctuated from month to month, but it was up nearly $20 a barrel at the beginning of October before falling by more than $12 a barrel during the course of the month.

The price of oil was on a steady incline throughout most of 2018 – until a recent drop CANADIAN OIL producers – and investors in the sector – have had a rough few years, but for most of 2018, it appeared the darkest days had passed. All the major benchmarks saw an uptick in prices after early-year fluctuations. But a spike at the beginning of October was followed by a precipitous drop that, at press time, was ongoing.

Analysts have attributed the sharp decline in price to a few issues. The first is the US-China

27%

Increase in Brent crude price between January and October

14.2%

Decline in Brent crude price during October

trade war, which has raised fears that global growth could slow, leading to less demand for oil. In addition, temporary waivers granted by the US for eight countries to continue importing Iranian oil, along with production increases from OPEC and Russia, have led to oversupply, putting downward pressure on prices. The question now is whether demand can catch up with supply and return oil to its previous momentum.

24.6%

Increase in WTI crude price between January and October

15.4%

Decline in WTI crude price during October Source: Oilprice.com

THE DRIVERS OF DEMAND

WTI CRUDE PEAKS

While oil demand in Europe has slowed over the past few years, strong economic growth in both the US and in emerging markets has led to a surge in demand since 2016.

Much like Brent Crude, the US benchmark of West Texas Intermediate [WTI] has also seen its share of fluctuation during 2018, including a significant spike in October.

GASOIL DEMAND, YEAR-OVER-YEAR CHANGE

600

Jan Jan22

THOUSAND BARRELS PER DAY

450

Mar Mar11

300

$60.99

Apr Apr22

$63.01 $63.51

150

May11 May

0

Jun11 Jun

$65.81

Jul22 Jul

$73.94

Aug11 Aug

$67.66 $69.80

-150 -300 -450

Sept33 Sept

$75.30

Oct11 Oct 1Q15 2Q15

3Q15

US

4Q15

1Q16 2Q16 3Q16 4Q16

OECD Europe

1Q17 1Q17

3Q17

China

4Q17

1Q18 2Q18

3Q18

India Source: OPEC Monthly Oil Market Report, October 2018

8

$60.42 $65.80

Feb Feb11

Nov11 Nov $0

$63.69 $20

$40

$60

$80

$100

PRICE PER BARREL Source: Oilprices.com; all figures in US$

www.wealthprofessional.ca

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27/11/2018 3:56:46 AM

$100 $84.98

PRICE PER BARREL

$80

$60

$66.87

$76.79

$73.13

$69.65

$78.15

$77.30

$72.89

$72.39

$67.64 $63.83

$40

$20

$0

Jan 2

Feb 1

Mar 1

Apr 2

May 1

Jun 1

Jul 2

Aug 1

Sept 3

Oct 2

Nov 1

Source: Oilprice.com; all figures in US$

OPEC BASKET SURGES AND FALLS

WCS IN THE DOLDRUMS

The OPEC Basket Index, which tracks the price of oil produced by 13 OPEC members, generally followed the same pattern as the other major oil benchmarks. While it didn’t reach the heights of Brent crude, it did top $80 a barrel in early October before taking a significant step back.

The oil picture is even bleaker at home, where the price for Western Canada Select [WCS] – which always trades lower due to quality and transportation issues – has been slumping throughout the fall.

Jan 2

$100

$35.17

Feb 1 $81.49

PRICE PER BARREL

$80

$60

$64.83 $66.83 $62.23 $66.48

$74.23 $75.28 $72.10 $75.77 $70.60

$33.30

Mar 1 $72.64

$30.49

Apr 2

$36.51

May 1

$48.85 $38.06

Jun 1

$47.94

Jul 2 $40

$34.16

Aug 1

$39.80

Sept 3 $20

Oct 1 Nov 1

$0

$28.30

Jan 2

Feb 1

Mar 1

Apr 2

May 1

Jun 1

Jul 2

Aug 1

Sept 3

Oct 2

Nov 1

Sources: Oilprice.com; all figures in US$

$18.19

PRICE PER BARREL Source: Oilprices.com; all figures in US$

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UPFRONT

NEWS ANALYSIS

The new NAFTA How will the new United States-Mexico-Canada Agreement impact the Canadian and North American economies, and what does it mean for Canada’s other international trade agreements?

THE FEARS of many in the financial industry were resolved on September 30 as Canada agreed to join the US and Mexico in a new free-trade agreement. While it’s still early, the news has had positive reverberations on the Canadian economy.

After the USMCA deal was announced, the market began pricing in the news, and the Canadian dollar jumped to its highest point since May. While some specifics of the deal might not please all, many experts believe merely having an agreement in place is a positive step for Canadian businesses.

“For the Canadian economy, it’s a good thing we got this [USMCA] deal,” says Kurt Reiman, managing director and chief

Wealth Management Group at HollisWealth (a division of iA Securities), adds that “there hasn’t been a breakdown in trade between the three countries who have had a successful deal in place for the last couple decades. It alleviates uncertainty, and the stock market hates uncertainty.”

Hamid and his team think having the USMCA deal in place lifts a cloud that’s been hanging over the economy since NAFTA negotiations began, which could extend the current market cycle. Hamid also believes stocks in certain sectors could see some upside from the deal.

“Sectors like financials, potentially energy and the Canadian dollar will benefit,” he

“[The USMCA deal] is good for the economy, but it’s not yet sufficient for the equity market to move higher” Kurt Reiman, BlackRock investment strategist for Canada at BlackRock. “The impact on the supply chain is a really important equation. It’s good for the economy, but it’s not yet sufficient for the equity market to move higher.”

Nader Hamid, portfolio manager at Total

10

says. “In terms of specific industries, auto suppliers, manufacturing and companies that transport to the US will benefit from cheaper costs.”

Meanwhile, Reiman thinks the deal will prompt more spending by companies on

both sides of the border.

“Business investment spending has been so weak at this stage of the economic expansion,” he says. “I would have expected much stronger capex in Canada, and that’s even true in the US, where we see the uncertainty overhang causing businesses to take a pause when investing in their own future. That’s been lifted, so on the margins, that’s a positive.”

Hamid does acknowledge some of the negative aspects of the deal from a Canadian perspective. For one, the tariffs imposed by the US earlier this year on aluminum and steel remain in place. Another aspect of the deal that raises some concern is the clause that limits one partner’s ability to form trade agreements with other economies without approval from the other partners.

“The new regulation that Canada cannot make deals with other economies without

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FAST FACTS: THE USMCA

Replaces NAFTA, which has been in existence since 1994

Maintains NAFTA benefits by making the majority of trade between the three countries duty-free

Dispute settlement from NAFTA remains in place

New automotive agreements should generate more North American production

Provides increased market access for American producers to Canadian agriculture industry Source: Government of Canada

approval from the US and Mexico was surprising,” Hamid says. “I think there are positives and negatives to that. If Canada were to negotiate with, say, China alone, there isn’t as much power as if the three

that the US might be willing to forge a trade agreement between North America and China and put an end to the trade war that’s been going on since March?

“Now that whole trade narrative ... has

“Sectors like financials, potentially energy and the Canadian dollar will benefit [from the deal]” Nader Hamid, Total Wealth Management Group countries do it together. On the negative side, Canadian exports to China have grown quite a bit. China has become a more important trade partner, and that might slow down.”

Attention will now inevitably turn to China – could the USMCA deal be a signal

really narrowed away from North America and autos, we are really seeing an administration that has a laser-like focus on China,” Reiman says. “Tariffs are part of it to the extent that China, and the rest of the world, can sit down and say China is not playing

by the rules but is benefiting from the rules, and that needs to change. If China can make some concessions on this side, I think you’ll see these tariffs get rolled back.”

Hamid sees the Trump administration’s willingness to make a deal with Mexico and Canada as a positive sign, but not necessarily one that will translate into successful negotiations with China.

“I think you have to look at ... the pros and cons,” he says. “The pro is that it is possible to make a deal with the Trump administration.

On the flip side, he may also be lining up for harder, longer negotiations with China based on some of the stipulations put in the USMCA.” If progress from the USMCA can help further a deal between the US or North America and China, it could mean even more opportunities for investors who have been hesitant to look abroad.

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27/11/2018 3:57:50 AM

UPFRONT

INTELLIGENCE CORPORATE ACQUIRER

TARGET

PRODUCTS COMMENTS

B.E.S.T. Investment Counsel

1832 Asset Management

B.E.S.T. has acquired the management, services and principal distribution contracts for 1832’s Dynamic Venture Opportunities Fund

Canoe Financial

Fiera Capital

Canoe is set to acquire the rights to manage nine of Fiera’s retail mutual funds by the first quarter of 2019

GWL Realty Advisors

Guggenheim Real Estate

GWL Realty Advisors, through its US subsidiary, has agreed to acquire Guggenheim’s real estate private equity platform

PARTNER ONE

PARTNER TWO

COMMENTS

CDPQ

Generation Investment Management

The pension fund is partnering with the responsible investment firm to commit an initial US$3 billion in sustainable investing over the next eight to 15 years

TD Bank Group

BEAR Centre, University of Toronto

TD has become a founding member of the research centre, which will allow it to bring additional behavioural finance resources and applications to TD Wealth clients

NCM launches pension portfolios

NCM Investments has unveiled three new funds that aim to provide pension-style investing by combining a variety of investment strategies in a single product. The new offerings include the NCM Conservative Income Portfolio, a global fixed-income fund; the NCM Balanced Income Portfolio, a global neutral-balanced fund; and the NCM Growth and Income Portfolio, a global equity balanced fund.

“The NCM Pension Portfolios provide access to award-winning managers, low fees and global diversification in a one-ticket solution,” said Wan Kim, senior vice-president of national sales and marketing at NCM Investments.

TD doubles down on behavioural finance

Hoping to provide more behavioural finance resources and applications to its wealth clients, TD Bank has become a founding member of the University of Toronto’s Behavioural Economics in Action at Rotman [BEAR] Centre, which will undertake cutting-edge research in behavioural economics. The agreement expands on TD’s previous efforts to apply behavioural finance tools in wealth management – in 2017, the bank introduced a proprietary tool that allows advisors to identify clients’ blind spots and provide more tailored and meaningful financial plans.

“The work we have done in behavioural finance to date has been instrumental in enhancing the advice and services our advisors provide to our clients,” said Dave Kelly, TD’s SVP of private wealth management. “Research by BEAR will enable us to better understand the underlying factors that help drive financial decision-making so we can connect with our clients on a deeper, more meaningful level.”

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Nicola turns to resources and infrastructure

Nicola Wealth Management has introduced the Nicola Infrastructure and Renewable Resources Fund. Focused on global infrastructure and renewable resources – sectors characterized by strict regulatory oversight and high barriers to entry – the fund will offer access to a wide universe of real assets, including bridges, highways, farmland, timberland and more.

“People will continue to require food, clean water, electricity and roads,” said Nicola Wealth’s David Sung.

“We believe that these additional asset classes will offer our clients a more diverse portfolio, better riskadjusted returns and faster deployment of capital.”

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PEOPLE Manulife rolls out thematic funds

Manulife Investments has partnered with Pictet Asset Management, a trailblazer in thematic investments, to launch two new mutual funds.

The Manulife Global Thematic Opportunities Fund and Manulife Global Thematic Opportunities Class will invest in companies set to benefit from large social, economic, political, environmental or technological changes. As the funds’ subadvisor, Pictet will leverage its experience and expertise in themes such as robotics, digital security, nutrition, health, timber, water, clean energy, biotechnology and premium brands.

Sun Life introduces tactical ETF portfolios

Sun Life Global Investments has launched the Sun Life Tactical ETF Portfolios, a suite of five mutual funds that invest in ETFs and other mutual funds. Designed to provide clients with exposure to ETFs within the safety net of an actively managed mutual fund, the lineup includes the Sun Life Tactical Fixed Income ETF Portfolio, the Sun Life Tactical Conservative ETF Portfolio, the Sun Life Tactical Balanced ETF Portfolio, the Sun Life Tactical Growth ETF Portfolio and the Sun Life Tactical Equity ETF Portfolio. All five products feature a strategic asset mix that can be adjusted to respond to changing economic conditions.

Canoe Financial looks to streamline product shelf

Canoe Financial has proposed mergers for four of its funds. The firm is looking to merge the Canoe Equity Income Portfolio Class into the Canoe Asset Allocation Portfolio Class, the Canadian Monthly Income Portfolio Class into the North American Monthly Income Portfolio Class, the Canadian Corporate Bond Fund into the Bond Advantage Fund, and the Floating Rate Income Fund into the Strategic High Yield Fund. To facilitate the mergers, Canoe plans to create new series for certain continuing funds, which will only be available to existing investors in the terminating funds.

NAME

LEAVING

JOINING

NEW POSITION

Pat Cronin

N/A

BMO Financial Group

Chief risk officer

Nicholas Hann

Macquarie Capital Markets Canada

Canada Infrastructure Bank

Head of investments

Jeff Macoun

N/A

Great-West Lifeco

President and COO

Patrick Maroney

GE Capital Real Estate

Timbercreek

Executive director, origination – US

Jennifer McPeek

Janus Henderson Investors

Russell Investments

Chief financial officer

Lucas Pontillo

Manulife Asset Management Canada

Fiera Capital

Executive vice-president and global CFO

Great-West Life names new president and COO

Great-West Lifeco has appointed Jeff Macoun as its new president and COO to replace Stefan Kristjanson, who is retiring at the end of the year after nearly 30 years at the company. Macoun’s own experience at Great-West Life spans more than three decades, including leadership roles in both the group and individual customer divisions. Most recently, he was deputy COO for Canada and executive vice-president of the group customer division.

“Given Jeff’s strong leadership track record with the company, he is well placed to deliver on the next phase of our growth strategy,” said Great-West Life president and CEO Paul Mahon.

Fiera Capital appoints new EVP and global CFO

Fiera Capital has named Lucas Pontillo as its new executive vice-president and global CFO. Pontillo will work with Fiera’s global management committee and global teams to maximize performance and advance the firm’s 2022 strategic plan.

Boasting significant knowledge of the investment management industry, along with global leadership experience in treasury, strategy, mergers and acquisitions, and risk management, Pontillo most recently served as COO at Manulife Asset Management Canada; prior to that, he was CFO of Manulife’s Global Asset Management business, where he played a key role in the acquisition and integration of Standard Life Investments Canada.

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UPFRONT

ETF UPDATE NEWS BRIEFS Cryptocurrency manager First Block moves into the ETF space

First Block Capital, the first registered investment fund manager in Canada dedicated to cryptocurrency and blockchain investments, has launched the FBC Distributed Ledger Technology Adopters ETF. Trading on the Aequitas NEO Exchange under the ticker symbol FBCN, the fund provides equity exposure to industry-leading global companies and innovators in distributed-ledger technology [DLT]. First Block said it believes DLT, which includes blockchain technology, is a fundamental innovation that could transform global commerce and the economy.

WisdomTree launches new North American bond ETF

WisdomTree Canada has added to its fixed-income product suite with the ONE North American Core Plus Bond ETF. Managed by One Capital Management, the fund trades on the TSX under the ticker symbol ONEB. With a management fee of 0.55%, ONEB will actively invest in investment-grade North American fixedincome securities from corporations, federal and state/provincial governments, and government-related entities. “We’re thrilled to continue the expansion of our ETF lineup and provide Canadian investors increased access to actively managed fixed-income strategies,” said WisdomTree EVP Kurt MacAlpine.

Brompton Funds bolsters ETF shelf with three active ETFs

Brompton Funds has launched three active ETFs on the TSX that offer monthly distributions. The Brompton Flaherty & Crumrine Investment Grade Preferred ETF (BPRF) mainly invests in preferred and income-producing corporate securities

14

and will be subadvised by US-based investment manager Flaherty & Crumrine.

Meanwhile, the Brompton Global Dividend Growth ETF (BDIV) will invest in at least 20 global dividend growth companies, writing covered calls on up to 33% of its portfolio as needed. Finally, the Brompton North American Financials Dividend ETF (BFIN) will invest in at least 15 North American financial services companies with a minimum market cap of $5 billion.

AGF Investments launches global multi-sector bond ETF

AGF Investments has launched the AGFiQ Enhanced Core Global MultiSector Bond ETF (QGB) on the Aequitas NEO Exchange. Using AGFiQ Asset Management’s quantitative investment management team and proprietary models, the fund ranks global bonds based on factors such as growth, value, quality and risk. The portfolio is diversified across different asset classes, including investment-grade corporate bonds, high-yield corporate bonds, and government bonds from developed and emerging-market countries; foreign currency exposure is hedged back to Canadian dollars.

Horizons ETFs steps into sustainable investing

Horizons ETFs is capitalizing on the trend toward socially responsible investing [SRI] with its latest ETF. The Horizons Global Sustainability Leaders Index ETF (ETHI) is the firm’s first SRI-focused fund. Tracking the Nasdaq Future Global Sustainability Leaders Index, ETHI will provide exposure to 100 of the world’s largest companies, based on market capitalization, that have demonstrated a core commitment to environmentally sustainable business practices, giving investors access to an SRI-screened passive portfolio with a low carbon footprint.

Why chasing hot ETFs is a bad idea A new study shows that the funds with the biggest inflows had the worst performance Stock investors have long known that chasing hot names is generally a good way to get burned – and new research shows that’s also true for ETFs. In a recent study, Leuthold Group senior analyst Jun Zhu examined fund flow data between April 2006 and April 2018 for more than 2,000 US-listed ETFs. Zhu then ranked the ETFs into five categories based on one-month, two-month and three-month fund flows as a percentage of month-end AUM, after which she calculated the equalweighted returns of each basket. Zhu found that the ETFs with the highest inflows had the lowest returns (-0.01%), while the other funds achieved one-month returns between 0.37% and 0.48% According to Zhu, this pattern was robust through back-tests covering two-month and three-month fund flow data. Extending the horizon to six, nine and 12 months further showed that funds with the biggest inflows underperformed over all return horizons.

Looking at how investors would have been affected, Zhu found that people who maintained equal-weighted portfolios in the highest-inflow ETFs over the 12-year study period would have seen an 8% loss. In contrast, an equal-weighted portfolio using the less popular ETF baskets would have achieved returns of 72% over the same period.

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“We know equity investors, especially retail investors, have the tendency to chase returns,” Zhu told US-based magazine Financial Advisor. That herd behaviour, she speculated, tends to inflate valuations of the underlying assets in the ETFs; as the valuations revert back to normal, the asset will eventually underperform.

“We know equity investors, especially retail investors, have the tendency to chase returns” But there’s a caveat to Zhu’s research.

While that tendency to perform poorly after strong inflows was consistent in equity ETFs, fixed-income funds didn’t show the same behaviour. In fact, inflows and performance in fixed-income funds across the categories Zhu studied have been flat since 2009.

“Fixed-income investors are more riskaverse,” Zhu noted. “They want to protect their principal or protect their investment. So instead of return-chasing, when things are not going well, they may overreact [and sell].”

While Zhu added that a closer look would be necessary to explain for certain why equity ETFs with high inflows underperformed, the research sounds a useful note of caution. “It’s just something that you want to keep in mind when you are trying to build your portfolio – to probably avoid certain ETFs that are really hot,” she said.

Q&A

Rob Wessel Managing partner HAMILTON CAPITAL

Years in the industry 20+ Fast fact The Hamilton Capital Canadian Bank Variable-Weight ETF (HCB) invests in the Big Six banks via a unique monthly rebalancing strategy based on mean reversion

A new strategy for bank investors Can you talk about the possible reasons behind the mean-reversion trend in Canadian banks?

Over the years, mean reversion has been one of the most popular themes in Canadian bank investing. Many analysts have published work to show that Canadian banks have exhibited powerful meanreversion tendencies over the past two decades. The individual Canadian banks tend to perform similarly over time, meaning a strategy of selling the winners and buying the laggards has generated higher returns over time.

Mean reversion is a powerful theme because the Canadian banks are very similar companies. Their business mix and geographic footprints have substantial overlap. They have relatively equal brands, virtually identical product offerings, similar size and scale, and operate under the same regulatory regime.

How does that play into the strategy behind the Hamilton Capital Canadian Bank Variable-Weight ETF? Given that the Canadian banks have well established meanreversion tendencies, we rebalance HCB monthly and make large distinctions in weighting between the laggards and outperformers from the prior month by overweighting the three most oversold banks to 80% and underweighting the three most overbought to 20%.

An individual investor attempting to execute this strategy would have to take time each month to try to rebalance while paying retail trading costs. We can effect this rebalancing each month for the investor at institutional trading costs, which are substantially lower.

HCB also pays monthly dividends, which investors find valuable.

And the strategy is executed using a formula that eliminates discretion and emotion.

How might market turbulence affect HCB’s performance?

The sector has demonstrated mean-reversion tendencies in both up and down markets, with the greatest impacts during the most volatile periods. In fact, the benefits from mean reversion have been greatest in periods of market turbulence relative to an equalweighted portfolio of Canadian banks. That means such a strategy, based on past performance, theoretically creates lower risk of declines in large market corrections.

How has HCB been received by investors and advisors?

The interest we have received so far has been very positive, and we are excited to provide investors with a low-cost, efficient vehicle to potentially achieve higher returns, increased diversification and, if history is a guide, reduced risk.

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27/11/2018 9:13:48 PM

UPFRONT

ALTERNATIVE INVESTMENT UPDATE

Private equity that levels the playing field One private equity firm has found success by stepping in for disadvantaged business owners

after raising their first fund, but we’ve stayed faithful to this space,” says Larry Klar, partner of the Shotgun Fund.

The Argosy Partners team analyzes whether the company is profitable and whether they’re dealing with an owner-manager who can work within their partnership model. After ticking off those and other boxes, they can offer to fund a buyout. “We stress three things at the outset,”

“A lot of private equity firms move upmarket, but we’ve stayed faithful to this space”

Toronto-based Argosy Partners recently announced it will be launching Shotgun Fund IV, a niche fund that will seek up to $50 million in limited partnership commitments. The fund’s strategy revolves around the shotgun clause, a conflict-resolution provision often included in private companies’ partnership or shareholder agreements. It essentially allows one shareholder to issue an ultimatum to their partner or co-owners to either buy out the shareholder or sell their own shares.

“Unfortunately, a lot of people invoke it

NEWS BRIEFS

when their partner is in a desperate situation,” explains Richard Reid, founder and partner of the Shotgun Fund. “They pull the trigger and name a bargain-bin price, which they know the other party can’t evaluate or afford at the time.”

Through an extensive referral network, the Shotgun Fund receives calls from people in danger of being bought out of a business they spent their lives building. The fund focuses on the small and medium-sized business market.

“A lot of private equity firms move upmarket

Dynamic Funds joins liquid alternative space

Dynamic Funds has launched two new liquid alternative fund offerings.

The Dynamic Alpha Performance II Fund aims to protect capital over a wide range of economic and market environments by identifying investment opportunities on both the long and short side of the portfolio. Meanwhile, the Dynamic Premium Yield PLUS Fund seeks long-term capital appreciation from US equity securities, writing call and/or put options to generate premium yield and gaining leverage through the use of derivatives.

16

Reid says. “We want to build a team, we want to grow the business, and we want to sell the company at some point in the future.”

By focusing on shotgun-clause situations, Argosy Partners cuts out a significant amount of uncertainty from the deal-making process.

“The bane of most private equity professionals’ existence is negotiating with a business owner for months or years, only for them to change their mind about selling,” Reid says. “With a shotgun situation, you know the price and you have a timeline.”

Argosy Partners has successfully closed 15 transactions; its most recent Shotgun Fund produced a 13% IRR over an 18-year period.

“That’s why we really like investing in small and medium-sized businesses,” Reid says. “We believe that’s where opportunities for outsized gains are more available.”

Co-working, seniors driving real estate trends

According to PwC’s 2019 forecast for the commercial real estate sector, co-working or flex office spaces should continue to exhibit strong momentum; the subsector is forecast to make up 30% of corporate real estate portfolios by 2030. PwC also expects senior lifestyle housing to show strong growth in 2019, as Canadians over the age of 65 have now surpassed those under the age of 15. “In 2017, 31% of Canadians aged 85 and older lived in collective dwellings, which will only grow in upcoming years,” the report said.

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Q&A

Charles Taerk

Taking an alternative position on cannabis

President and CEO FAIRCOURT ASSET MANAGEMENT

Years in the industry 24 Fast fact Faircourt subadvises the Ninepoint Alternative Health Fund, which invests in North American firms involved in nutraceuticals and cannabis

What appeal do alternative health companies hold for Canadian investors?

In North America and around the world, we see people of all ages taking a more proactive approach to their health. Because of increased information on the side effects for many drugs, as well as healthcare cost constraints, people are becoming more interested in exploring non-traditional medicines. They are looking at alternatives such as healthier meal options, organics and meatless proteins, and naturally sourced medicines – an area where cannabis fits prominently. All of these areas are covered in our fund, and the theme resonates with investors and advisors we’ve spoken to.

One of the benefits the fund offers is mitigating the volatility expected from the cannabis sector. What strategies are in place to do that, and how has the fund performed so far?

As active managers, we periodically trade the names in our portfolio, taking profits when we believe a company may be trading well ahead of our estimates. Periodically, we will also hold a healthy cash weighting; from the end of August to the middle of October, we progressively increased our cash position from 10% to 23%, as we felt the sector was getting overheated. That made the weakness immediately after legalization less of a challenge for the fund.

In addition, we use options to increase or reduce

New Purpose fund makes it cheap to hold gold

Purpose Investments has launched the Purpose Gold Bullion Fund as a low-cost, convenient way to invest in physical gold. Available to investors through three ETFs and an F-class mutual fund, the fund offers unique access to physical gold bullion, held on a segregated basis in the treasury vault of the Royal Canadian Mint. Fund investors can receive in-kind redemptions of their physical gold directly from the mint. The minimum redemption offered by the fund is 1kg, a tenth of the redemption requirements for other physical gold bullion funds.

holdings and help preserve capital. Given the volatility in the cannabis sector, we are earning healthy option premiums from occasional puts on equities that we feel will fall to a price more in line with their value. We are also able to actively invest up to 10% of the fund’s NAV in private companies, particularly as we see opportunities in Canadian and US cannabis-involved companies that are anticipated to go public by May of next year.

Finally, we own large-cap pharmaceutical companies, health and wellness companies, healthrelated technology companies, and other noncannabis firms that provide growth with less volatility.

All of our strategies have helped the fund achieve less than half the volatility of the largest passive ETF strategy, as well as a year-to-date return of approximately 34% as of October.

How do you think your decision to list the fund on the NEO Connect Exchange will benefit current and future investors?

The decision to list on the NEO facilitates the offering of the mutual fund to investment advisors who want to efficiently allocate it to their portfolio of clients.

Rather than doing individual transactions for every client, advisors can buy the fund in bulk through the platform-traded fund format and then efficiently allocate units to each client account. This creates great time savings for advisors who run fee-based and discretionary portfolios.

Vistara launches $100 million debt fund

Vistara Capital Partners has announced the first close of the Vistara Technology Growth Fund III LP. With a goal to raise US$100 million, the fund will provide senior or subordinated debt financing for mid- to later-stage tech companies. Vistara will invest US$5 million to US$15 million in each company through relationships with bank lenders and equity funds across North America. Additional co-investment capacity is available through a network of LPs, including family offices, foundations, and current or former tech executives.

CIBC unveils new absolute return strategy

CIBC Asset Management has launched the CIBC Multi-Asset Absolute Return Strategy, which invests in alternative asset classes and strategies such as currencies, commodities and factor-based strategies, in addition to traditional global asset classes. Over a rolling three-year period, the fund is targeting an annualized return 5% greater than Government of Canada 91-day Treasury bills, as well as annualized volatility that’s half that of the MSCI AC World Index (CAD).

www.wealthprofessional.ca

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27/11/2018 4:07:25 AM

PEOPLE

INDUSTRY ICON

PARTNERING FOR SUCCESS Richardson GMP president and CEO Andrew Marsh sat down with WPC to talk about how his firm has built true partnerships with advisors

AS THE leader of a renowned independent advisory firm, Richardson GMP president and CEO Andrew Marsh believes culture is a crucial driver of success. His original company, GMP Private Client, was founded on the idea of forging a true partnership with advisors, one that would give them equity in the company but also facilitate an open exchange of expertise from advisor to advisor. In 2009, GMP Private Client merged with Richardson Partners Financial to form Richardson GMP. “I saw an opportunity back in 2004 to help launch a new approach – an independent Canadian firm that stood for a high degree of integrity and professionalism with a sophisticated and client-centric approach,” Marsh says. “To be an equity owner wasn’t an opportunity for many professionals in the wealth management space, and offering it to our partners as we built the firm has become part of our culture of partnership and togetherness.”

When he was named president and CEO of Richardson GMP in 2010, Marsh seized the opportunity to hone his leadership skills.

“A real key success, after being CEO for three years, was acquiring Macquarie Private Wealth Canada,” he says. “It was a gamechanger for us and gave us tremendous scale of business. I really took pride not only in the negotiation and execution of that acquisition,

18

but also the opportunity to add so many well aligned partners to the firm.”

Today, Richardson GMP continues to thrive as a leading independent firm. Marsh attributes that success to the company’s spirit of collaboration with advisors.

“In one way, we operate as a partnership of

‘Treat others as you would like to be treated.’

It has really shaped how I conduct myself personally and professionally.”

Richardson GMP’s partnership approach also helps to further knowledge and expertise among its advisors and teams.

“Because we partner with some of the most

“From a leadership perspective, the key is maintaining the delicate balance of allowing people to run their business as they see fit, while holding them accountable to professional standards and the firm’s values” independent businesses but all carry a Richardson GMP business card,” he says. “From a leadership perspective, the key is maintaining the delicate balance of allowing people to run their business as they see fit, while holding them accountable to professional standards and the firm’s values.”

This perfect equilibrium is ingrained in Richardson GMP’s culture. “If you treat and speak to people like partners, you will achieve that balance,” Marsh says. “The best piece of advice I received was from my grandfather:

seasoned and experienced advisors, we work to create environments where they have the opportunity to learn from and share best practices with each other,” Marsh says. “Our team is made up of many exceptional people who influence and inspire each other every day.”

Understanding advisors Marsh’s own road to success began with a degree in management economics and finance from the University of Guelph. He launched his career as an investment analyst at

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PROFILE Name: Andrew Marsh Title: President and CEO Company: Richardson GMP Based in: Toronto Years in the industry: 28 Career highlight: Being part of the team that created Richardson GMP and tripling its size over the last eight years

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27/11/2018 4:09:01 AM

PEOPLE

INDUSTRY ICON

ScotiaMcLeod before establishing his own practice as an advisor for 12 years under the ScotiaMcLeod umbrella.

Working as an advisor deepened Marsh’s perspective on the industry. “I started with an interest and analytical love for business strategy and financial markets,” he says. “When I became an advisor, it shifted to an appreciation of the relationships and understanding the positive impact that good advisors can have on people’s lives.”

Despite his success as an advisor, Marsh found himself yearning for a greater chal-

“Having been an advisor, there’s nothing more frustrating than printing off a client’s data, only to see it’s inaccurate,” Marsh says.

“We dedicated a ton of time and resources to making sure we have exceptionally accurate client data. In addition, we provide data and metrics for an advisor’s practice. Reporting on the day-to-day details gives them better tools to make decisions on how to improve and grow their practice.”

Thanks to that data, Marsh and Richardson GMP are now focused on helping advisors scale their businesses by streamlining

“We are on such a great path. What I’m looking forward to as the next chapter is providing advisors and their clients with the ability to leverage technology for maximum impact” lenge. In 2004, he left his safety net behind to launch GMP Private Client. “To have the courage to take a risk, walk away and start my own company is something I will always be proud of,” he says.

Marsh not only created a new a firm, but also a unique culture that prevails in Richardson GMP today. The company hosts annual summits where all advisors are encouraged to come out and learn from one another. Richardson GMP also offers career development and coaching opportunities to advisors who want to develop specific skills or expertise.

“We hold our partners to the highest level of accountability to do the job for their clients,” Marsh says. “That means different things to different people on the freedom side. We want our advisors to determine their best direction to improve.”

Bright future Richardson GMP prides itself on having the best data available – not only about its clients, but also about its advisors and their practices.

20

practices and fostering efficiency.

“We are on such a great path,” Marsh says.

“What I am looking forward to as the next chapter is providing advisors and their clients with the ability to leverage technology for maximum impact.”

While Marsh is optimistic about the future for Richardson GMP advisors, he acknowledges that breaking into the industry is becoming more and more difficult.

“The barriers to entry for someone who wants to become a wealth advisory professional are high, and I worry they are only going to get higher,” he says. “My advice is to obtain quality training and accreditation on the process of wealth advice, not just focusing on selling products. I think the next generation needs a deep, comprehensive understanding of the process, which includes asking the important questions and instigating the conversations no one else is having. Too much focus lies on investment products, but I would argue that organizing and managing the overarching wealth process is far more important.”

RICHARDSON GMP AT A GLANCE

BEGINNINGS GMP Private Client was launched in 2004; it merged with Richardson Partners in 2009 to form Richardson GMP

ASSETS Richardson GMP currently has $31 billion in assets under management

STRENGTH IN NUMBERS The firm boasts 175 advisor teams spread across 21 offices in eight provinces

PHILOSOPHY Richardson GMP advisors focus on providing holistic, comprehensive, unbiased advice with unique investment solutions and a sophisticated platform

www.wealthprofessional.ca

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27/11/2018 4:09:04 AM

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27/11/2018 4:09:08 AM

SPECIAL REPORT

YEAR IN REVIEW

2018

YEAR IN REVIEW From rising interest rates to headline-grabbing cannabis stocks, 2018 had no shortage of events that impacted the financial world IN 2018, every day seemed to bring new developments to the financial industry. Advisors had to navigate numerous issues on both the national and international level to ensure they were doing the most for their clients.

Here in Canada, the CSA proposed a ban on deferred sales charges, forcing some advisors to re-evaluate their own practices. The country’s greying population prompted an increased focus on retirement preparation. Cannabis legalization, which became official on October 17, also made its presence felt in the market, as Canadian cannabis stocks frequently posted huge gains and losses overnight.

22

Advisors were also forced to contend with volatility in 2018’s other hot sector: cryptocurrency. In both the US and Canada, interest rates continued to rise and fund providers continued to try to outdo each other by lowering management fees. Meanwhile, outside of North America, emerging market economies took a hit.

As a backdrop to all of this, the bull market raged on, prompting experts to try to predict when it will end.

On the following pages, Wealth Professional Canada talks to experts from across the wealth management spectrum to get their insights on the trends that defined 2018 and how they might continue to reverberate in the year ahead.

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The race to slash fees intensifies The year saw major developments in the fee debate as the CSA moved to ban DSCs and fund providers continued to cut management fees FEES WERE at the forefront of the investment industry in 2018. After years of evaluation, the CSA released a report in June outlining a proposal to eliminate deferred sales charges, among other things, sparking intense debate among advisors about the merits and pitfalls of DSCs. In September, the Ontario government came out with a statement against the CSA’s proposals, further stoking the flames of the debate.

Meanwhile, fund managers continued to

it “a positive sign for the investment industry in terms of improving fee transparency and making investment fees more aligned with the interests of Canadian investors.”

Tiwari notes that Canadians pay some of the highest investment fees in the developed world and believes the CSA’s proposal will not only provide greater fee transparency, but also address certain conflicts of interest related to the sale of funds in Canada. “We feel strongly that investors are best served in an environ-

“We feel strongly that investors are best served in an environment in which fees are clear so that they can properly assess the true cost and suitability of each investment” Atul Tiwari, Vanguard Investments Canada slash their own management fees. Companies such as Vanguard, BlackRock, Fidelity.

Horizons and others kept moving their fees lower and lower in anticipation of more advisors switching to fee-based models. In August, both Fidelity and Horizons launched products boasting 0% management fees, changing the way investors look at funds.

Atul Tiwari, managing director at Vanguard Investments Canada, has been monitoring the situation throughout the year from both a product and investment standpoint. He welcomes the CSA’s proposal, calling

ment in which fees are clear so that they can properly assess the true cost and suitability of each investment,” Tiwari says.

As more advisors move toward fee-based models, Tiwari believes this will bode well for low-cost ETFs and mutual funds. “The investment industry, particularly ETFs, has experienced exceptional growth over the past few years,” he says, “and while the proposals stopped short of an outright ban on embedded commissions, there is already a strong organic shift towards fee-based rather than commission-based financial

A TIMELINE OF FEE MOVES

January 10, 2017

CSA releases consultation results on the option of discontinuing embedded commissions

June 21, 2018

CSA publishes proposal to eliminate DSCs

August 1, 2018

Horizons ETFs launches two funds with 0% management fees, the Horizons Conservative TRI ETF Portfolio and Horizons Balanced TRI ETF Portfolio

August 2, 2018

Fidelity launches two 0% manage­ ment fee funds, the Fidelity ZERO Total Market Index Fund and Fidelity ZERO International Index Fund

September 13, 2018

CSA proposes new rules prohibiting certain embedded commissions

September 13, 2018

Ontario Finance Minister Vic Fedeli issues a statement disagreeing with the CSA proposals Source: CSA; Government of Ontario; Horizons ETFs; Fidelity Investments

advice models. It’s clear that Canadian investors and regulators are becoming more aware of investment fees, which is positive, since research has shown that one of the best predictors of future investment performance is the cost of the fees you pay. This will continue the drive to lower-cost ETFs and mutual funds.”

One thing that could offset the current direction is the position of the Ontario government. Tiwari believes it’s still too early to comment on the government’s statement as Vanguard, along with others in the industry, assess the impact. While some in the industry are against the banning of embedded commissions on the basis of making financial advice accessible to all Canadians, if more products at or near a 0% fee continue to come to market, the industry could be looking at a sea change.

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SPECIAL REPORT

YEAR IN REVIEW

ETFs keep the momentum going Canada’s ETF space continued to grow in 2018, welcoming six new providers and more than 100 new products

that ETFs can get to more investors.”

She also notes that fixed-income ETFs saw increased inflows in 2018 as investors began to view them as an easy way to incorporate fixed income into their portfolios.

One dark cloud for Canada’s ETF industry in 2018 was a decline in sales between the first and second quarter. However, Dunwoody attributes this to rebalancing and money moving between ETFs, and is optimistic that sales will rebound before the end of the year.

Heading into 2019, Dunwoody believes at least one more provider will enter the market, perhaps a bank. “I believe we will see the banks that haven’t already launched products do so either before the end of the year or in 2019 so that they can have them on their shelf,” she says.

All signs point to more growth for ETFs going forward. “The ETF industry is still only 10% the size of the mutual fund industry,” Dunwoody says. “If and when advisors start to switch to a fee-based model, ETFs will become more of an option. I think we will see more transfers to ETFs, and new money coming into the system will go into ETFs. As market

A SNAPSHOT OF THE CANADIAN ETF INDUSTRY IT WAS another strong year for the Canadian ETF industry, which has grown by leaps and bounds in recent years. Over the last six years, the number of ETF providers in Canada has jumped from five to 30, and ETFs continue to rake in assets – the Canadian ETF industry now boasts more than $163 billion in AUM. Pat Dunwoody, executive director of the Canadian ETF Association [CETFA], is understandably pleased with the increasing popularity of ETFs. “The growth in 2018 has been tremendous,” she says. “The year-overyear growth continues to be 20%, so we can’t complain about growth.”

One initiative the CETFA undertook in 2018 was an investor research study, which found that many investors still are not aware of ETFs and what they can offer.

“We need to make a greater effort to

raise awareness and inform them about the product,” Dunwoody says. “The industry is still quite small compared to the mutual fund industry. If clients’ accounts have done well with mutual funds, they have been reluctant to switch to ETFs. Until all advisors switch to fee-based accounts, it won’t really be an option. As the investment population begins to understand the impact of costs and fees, ETFs will become more of an option, but in a bull market, there is less necessity to look at the products.”

A major trend in 2018 was an increase in actively managed ETFs, something that wasn’t surprising to Dunwoody. “The firms that have been launching active products have a background in actively managed mutual funds, so it was a natural progression,” she says. “I hope the AUM growth continues so

Providers 30

AUM $163.2 billion

Total funds 640

Largest provider by AUM BlackRock ($59.5 billion) Source: CETFA, as of Sept. 30, 2018

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“The ETF industry is still only 10% the size of the mutual fund industry. If and when advisors start to switch to a fee-based model, ETFs will become more of an option” Pat Dunwoody, Canadian ETF Association growth slows, cost will become an issue, and that’s where there is opportunity for ETFs.” Dunwoody also believes the next generation of investors will continue to propel interest in ETFs. The largest wealth transfer in history between baby boomers and millennials is on the horizon, which could make

ETFs the primary vehicle for investing.

However, Dunwoody thinks that shift still may be a few years off.

“People are living longer, so the [wealth transfer] is not only coming later, but will be smaller,” she says. “One thing we have noticed is that when we speak at universities, close to

100% of the students who invest say they invest in ETFs, and only a small percentage in mutual funds. That leads to the assumption that the transfer of inheritance will be to ETFs.” Part of the reason Dunwoody sees new investors gravitating toward ETFs is their simplicity – a benefit that she believes will help awareness of ETFs continue to spread.

Dunwoody also believes 2019 could bring MFDA involvement in ETFs, which she thinks will help on the distribution side.

“Now the industry has enough firms, and with mutual fund companies getting involved, they have the ability to market the products,” she says. “ETFs need to be marketed differently to advisors. The more firms that are talking about ETFs, the more it will help the industry.”

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2018-09-11 3:34 PM

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SPECIAL REPORT

YEAR IN REVIEW

Cannabis sector commands headlines From large investments from major corporations to giant swings in producers’ stock values, marijuana investing was everywhere in 2018

YOU COULDN’T look at anywhere in 2018 without finding news of developments in the cannabis sector. As Canada’s October 17 legalization date drew near, the subject became more mainstream, leading to more institutions and corporations entering the industry to work with growth companies.

As CFO and portfolio manager at

26

Faircourt Asset Management, Doug Waterson oversees the Ninepoint Alternative Health Fund, which was the first mutual fund in Canada to incorporate cannabis-sector investments. He acknowledges that 2018 was an eventful year, adding that the elimination of the stigma around marijuana has been integral to its success.

“I think 2018 can be looked at as the year cannabis became mainstream,” Waterson says. “We have had a variety of things that happened – full legalization on October 17, [which means] 39 countries now have some form of legalization, including 20 of 28 in the European Union; increased interest from investors, including those in the US,

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since US companies can’t list; pressure for pharmaceuticals, alcohol and tobacco to get involved; and even more research into what the plant can do.”

Canopy Growth Corp. grabbed the bulk of headlines in 2018. In January, the cannabis producer reached an agreement with BMO to co-finance the company. “This was significant,” Waterson says. “BMO was the first major bank to participate in a cannabis company. I think you will see more banks follow.”

Canopy also listed on the New York Stock Exchange in August, providing US

certain cases, such as Tilray, there was also some degree of surprise. That trade price was just a perfect storm, combined with positive press in the US and a really thin float.”

Even with the volatility the cannabis sector has exhibited, Waterson still sees opportunity, but he believes investors need to be on the lookout for certain things.

“First, look at where we are,” he says. “We are out of the startup phase and in a more developed market. Management is important because there are a variety of factors to look at such as regulation, branding, opportunity and supply chains. The other thing is to

“I still think there is room for investors to make money, but perhaps not by buying and waiting. You need to be active and participate in new things like emerging extraction companies, retail and labs” Doug Waterson, Faircourt Asset Management investors with access to the sector. The company followed that with a $5 billion investment from Constellation Brands, the maker of Corona, which was the first of many partnerships in the sector – other links include Molson Coors and Hydropothecary Corporation, as well as Coca-Cola and Aurora Cannabis.

“All of [Canopy’s] developments have really energized the sector and led to speculation about who’s next,” Waterson says. “I think it all opened people’s eyes, and many investors are interested.”

In a sector that has so many moving parts, Waterson says the only thing that really surprised him in 2018 was the pace at which things happened. In particular, he points to the example of producer Tilray, whose stock shot up to $214.06 in September, only to sink to $100 days later.

“The speed of changes and regulation was pretty staggering – not just in Canada or the US, but everywhere,” Waterson says. “In

carefully understand a company’s business.

Investors need to understand what boxes they have checked off with things like supply contracts, branding, etc. The market won’t pay for just production much longer.”

That thinking is something Waterson incorporates in the Ninepoint Alternative Health Fund, which has grown significantly in 2018 as more advisors become interested in the cannabis sector. He adds that active management has been key to successfully navigating the shifting fortunes of this industry.

“Actively managing it allows us to be more specific than an index and avoids overvaluing something,” Waterson says. “When you look at a Canopy or Aurora, they trade at a premium. We see value in smaller companies and can overweight those names. I still think there is room for investors to make money, but perhaps not by buying and waiting. You need to be active and participate in new things like emerging extraction companies,

TOP 10 HOLDINGS IN THE NINEPOINT ALTERNATIVE HEALTH FUND 1

CannTrust Holdings (TRST)

2

Canopy Growth Corp. (CGC)

3

MedReleaf Corp. (LEAF)

4

Jamieson Wellness (JWEL)

5

Aurora Cannabis (ACB)

6

Hydropothecary Corp. (HYYDF)

7

Pinnacle Foods (PF)

8

UnitedHealth Group (UNH)

9

Savaria Corp. (SIS)

10

Procter & Gamble (PG)

retail and labs.”

With so much activity in the sector, Waterson expects a lot to happen in 2019.

“I think trends ... like strategic investing by alcohol, tobacco and pharmaceuticals companies will continue. We will see more medical legalization and further movements in the US towards not full legalization, but Band-Aids around the national/state system.

Here at home, I think the rollout will be underwhelming; I don’t think the provinces are truly ready – 2019 will sort out the issues, and the market will evolve, but there will be hiccups. I think technology is also going to help grow the industry and bring costs down.”

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27/11/2018 4:34:44 AM

SPECIAL REPORT

YEAR IN REVIEW

The bull market rages on When the current bull market will end is anyone’s guess – but it hasn’t happened so far in 2018 DESPITE NEWS of trade wars, political investigations and a flattening yield curve, the bull market persists. While experts continue to debate when the current run will finally end, Wolfgang Klein, SVP and senior investment advisor at Canaccord Genuity Wealth Management, believes we’re not there yet.

“It tends to end when earnings roll over,” he says. “Earnings are rising, so we have positive earnings growth, not negative. More import-

to run away on us. There may be a few more rate hikes, but even when you factor them in, earnings yield is still higher than the 10-year Treasury, giving equity premium, so it justifies why you can own stocks.”

Klein believes the market will finish the year with a late rally, but he isn’t overly concerned about the short term, as he’s more focused on investing his clients’ money over the long term. “If you look at a long chart of

“There has been no euphoric buying … overall, the stock market is not overly loved. That leads me to believe that perhaps the best is still in front” Wolfgang Klein, Canaccord Genuity Wealth Management

approach to making such a prediction.

“To put the economy into recession takes time,” he says. “For them to flatten the yield curve would probably take three rate hikes. To invert it could take another two or three. So you have five or six rate hikes to invert the yield curve. You don’t go into recession right when the yield curve inverts. The market continues to rally after because shadow banking kicks in.

With that kind of math, you could suggest 18 months to three years.”

While Klein leans towards the two-year mark, he adds that anything could stop the economy. But no matter the situation, Klein believes his strategy of cutting through the noise is the best way to prepare for whatever the market has in store.

“We focus on buying quality businesses with good balance sheets – businesses we understand and hold through the noisy periods,” he says. “If you have a value buy, you’ll never ... have trouble making money.”

For 2019, Klein believes the best days of this bull market might be yet to come.

“There has been no euphoric buying – a few sectors have, but overall, the stock market is not overly loved,” he says. “That leads me to believe that perhaps the best is still in front.”

THE S&P 500 KEEPS GROWING $3t

antly, it ends when people take money out of the system by inverting short-term interest rates above long-term rates, inverting the yield curve, and we are not there yet.”

The yield curve did flatten in 2018 as 10-year bond yields moved higher than 30-year bonds, sparking fears that a recession was on the way. However, Klein disagreed.

“The flattening was between the 10- and 30-year bonds, but the two- and 10-years still had some steepness to them, although the spread was narrowing,” he says.

And, he points out, the flattened yield curve eventually corrected itself. “Equity markets continue to rise,” he says. “Interest rates are still very low, and they aren’t going

the S&P 500, the 1987 crash is blip on the screen – the market is very resilient,” he says.

Klein does admit the market holds surprises every day, and he observed a few in 2018.

“Manulife was a surprise recently with a new case of a hedge fund going after one of their products,” he says. “Donald Trump surprised me every couple weeks, and the marijuana craze is interesting. At the end of the day, what I need to do is buy quality businesses for my clients that will grow revenue, grow earnings and appreciate in value over time. Good things happen to good companies.”

Predicting when the current bull market will end is nothing but a guess for Klein, although he does have a mathematical

$2.5t

$2t

$1.5t

$1t

$500b

$0

Source: SPIndices.com

28

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27/11/2018 4:34:53 AM

SPECIAL REPORT

YEAR IN REVIEW

Interest rates continue to climb Both the Bank of Canada and the US Federal Reserve have spent 2018 raising their overnight rates in pursuit of normalization BOTH THE US and Canadian economies remained strong in 2018, leading both the Bank of Canada and the US Federal Reserve to raise their interest rates. In Canada, the first 0.25% hike happened in January, followed by an additional 0.25% in both July and October to bring the rate to 1.75%. Meanwhile, in the US, the Federal Reserve raised rates for the third time in 2018 in September, bringing their short-term rate to 2.25%. More rate hikes are expected in the near future in both

more caution because as the US removes accommodation, it will affect global economies. “When you look at emerging markets, and to some extent Europe, the liquidity drain initiated by the US Federal Reserve – not just in hiking rates but in quantitative tightening – is setting off trip wires because they must wait and see how the economy reacts before instituting another rate hike.

“They aren’t trying to slay the consumer,” he adds, “just have growth continue without trig-

“Our forecast, when we look at GDP globally, is it has been slowing since earlier this year. That would suggest the economy can withstand these modest rate increases” Aubrey Basdeo, BlackRock Asset Management countries, leading some experts to wonder when consumers will begin to feel the pinch and how much it will affect the economy.

“We thought two hikes at most would be delivered by the Bank of Canada,” says Aubrey Basdeo, head of Canadian fixed income at BlackRock Asset Management. “We were a bit surprised about the change from the first half of the year to the second. We are worried about the removal of accommodation because the economy is operating above capacity, all of which is from the second-quarter growth.”

Basdeo believes the BoC should exercise

30

gering an inflation outbreak, but it is a delicate balance. One too many hikes could have negative consequence if it affects consumption, and ultimately you’ll see real estate asset prices have a negative reaction. That feeds into confidence and is the negative loop that happens.”

In the short term, Basdeo believes that rates will rise to 2% in Canada in January 2019. He also believes the US will see one or two more hikes in 2019 before a pause. “Our forecast, when we look at GDP globally, is it has been slowing since earlier this year,” he says. “That would suggest the economy can withstand

A TIMELINE OF CANADIAN INTEREST RATE HIKES Date

Interest rate

July 1, 2017

0.5%

July 12, 2017

0.75%

September 6, 2017 January 17, 2018 July 11, 2018 October 24, 2018

1% 1.25% 1.5% 1.75%

these modest rate increases. When you parse the global growth number, it is mainly the US contributing to the strong outlook. The rest of the world has been struggling. So will the world drag the US down, or will the US pull the rest of world up?”

The answer, for Basdeo, lies what happens in terms of free trade, open markets, free flow of goods, trade wars and geopolitical uncertainty. If trade wars, tariffs and uncertainty prevail, Basdeo says that will lead to portfolio construction that’s focused on resilience rather than aggressive growth.

Moving forward, Basdeo continues to stress caution for investors as rates increase.

He advises a ‘wait and see’ approach as rate hikes spill into other parts of the economy – in particular, the Canadian housing market and the US auto and student loan spaces.

“The removal of accommodation has the potential to set off unintended consequences, and that’s our point about portfolio resiliency,” he says. “Even though we see relatively strong growth and the US being a driver, the distribution around the profile has widened based on how much uncertainty has risen in the last six months.”

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Retirement dominates financial planning

CANADA’S AGING POPULATION Age 0–19

Age 20–64

Age 65+

16% 22%

Canada’s aging population made retirement planning a key issue in 2018 62%

THE IMPORTANCE of planning for the full duration of retirement has never been greater.

While most clients don’t underestimate the planning itself, Chris Poole, a financial planner with Sun Life Financial, has noticed that people are underestimating just how long they will live. As such, he says it’s critical for advisors to have conversations that allow

planning on for retirement,” Poole says. “They spent their life paying down debt and saving.

Come retirement, all that money they have saved, they are spending. In a perfect world, people are living off the interest, but we know that’s not always the case. They use the interest and erode some capital.”

Poole breaks retirement down into three

“The reality is, we are living longer, and we need to have conversations about money and health” Chris Poole, Sun Life Financial them to fully understand their clients’ goals and needs.

“There are lots of risks that come from underestimating the duration of retirement,” Poole says. “Looking at Statistics Canada or FP Canada, we realize that the statistical longevity for a couple currently in their 60s is that one of them will probably live to 95. This really changes things because it’s not about planning until one spouse passes away – it’s planning for the spouse who’s sticking around the longest.”

For these reasons, Poole says it’s important to have conversations about expectations. For some, this conversation might not be easy to have, but it’s vital because it helps an advisor plan for all outcomes.

“Clients have had income streams coming in, filling up that bag of money that they are

phases: go-go, slow-go and no-go. Go-go is when people are spending their money doing the things they’ve always wanted to do.

Slow-go is when they start to slow down, and no-go is the later stage when they may have different needs, such as long-term care.

“We encourage clients to take advantage of the assets they have accumulated – they should be excited about spending that money,” he says. “That being said, what we spend in the go-go phase affects what we have in our slow-go and no-go phases. As people start to think about the longevity risk, they realize what they want their lifestyle to look like on the back end of retirement.”

Sometimes clients need to make trade-offs later in retirement, so it’s important for that to be part of the initial conversation. Poole says running out of money is a real danger because

Canadian population, 2016

23%

22%

55%

Estimated Canadian population, 2031 Source: Statistics Canada

it can have a ripple effect on an entire family.

Because the dynamics of retirement have changed, so too must an advisor’s approach to income – and Poole believes it’s up to advisors to understand their clients and provide the best solution.

“With interest rates increasing, annuities can start to look favourable,” he says. “In other cases, segregated funds with steady streams of income look favourable. In others, bonds themselves may be a good solution. It’s understanding what a client wants and helping them determine what they need.

“The reality is, we are living longer, and we need to have conversations about money and health,” he adds. “There are all sorts of products to supplement the need for capital throughout all phases. While the money is available in the go-go phase, let’s slice off a little bit of income and invest into possible downside when we might need it on the back end.”

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SPECIAL REPORT

YEAR IN REVIEW

Emerging markets weather a rough year Despite their struggles in 2018, the long-term view on emerging markets might not be so bleak

THE PAST 12 months have been rough for emerging markets, which investors viewed as vulnerable in part due to US protectionism, a strong US dollar, trade war risks and moderating growth. Those factors, along with issues in Argentina and Turkey, led many investors to act emotionally, selling off

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emerging market stocks.

But some, including Tyler Mordy, president and CIO of Forstrong Global Asset Management, believe the future of emerging markets might not be so negative.

“I think extrapolating the emerging markets of the 1980s and 1990s to the present

is a mistake,” Mordy says. “[Today], emerging market economies are much more shockresistant thanks to macroeconomic factors such as the emergence of domestic pensions, less reliance on foreign funding, improved trade balances, better fiscal balances and other strong secular growth drivers.”

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Mordy believes there has been a misconception that EMs have huge amounts of debt in US dollars. Headlines from specific cases such as Turkey and Argentina have added to the perception.

consumer for the next couple decades. Never have we seen 3 billion consumers enter the global marketplace. It is shifting how global demand and growth works.”

That should cause emerging markets to

“[Today], emerging market economies are much more shock-resistant thanks to macroeconomic factors” Tyler Mordy, Forstrong Global Asset Management “I don’t think those cases are a microcosm,” Mordy says. “Their circumstances are very different. Political dysfunction is one thing, but they are running big deficits, fiscal imbalances and don’t have the same structural reform that took place in other EMs.” Thanks to past events, today’s emerging markets have implemented measures to avoid similar issues. “Most EMs, especially in Asia, learned from the Asian crisis,” Mordy says. “They reformed and implemented things like domestic pensions and social welfare. The conditions in Asia right now are so remarkably robust – you look at household incomes going up, the way corporations are moving to stronger governance, and policymakers bringing in things Western economies have.”

For Mordy, the biggest influencer on the performance of emerging markets in 2018 has been the US-led trade wars. “The US has not created many friends,” he says. “The main point is, we live in a globalized world with a globalized supply chain. Since the US has gone around it, we are left with China.

Their strategy is tried and true – divide and conquer. Because US business is so intertwined with China, they are pitting corporate America against the administration.”

Mordy stresses that maintaining a longterm view of emerging markets is important.

“By definition, these economies are emerging into the global economy and are going to be more volatile,” he says. “The biggest story we are noticing is the emergence of the Asian

have a huge impact for investors in the next few years. The World Bank projects emerging markets will account for 60% of the global economy by 2035, but Mordy still sees value

in certain areas, including “Asian stock markets and EM debt as a whole. If you compare bonds in the emerging markets versus the Western debt universe, we are starting from yields at 7% in the former, with EM currencies 20% to 40% undervalued compared to the US dollar,” he says. “When we look five years out at that income, plus the currency appreciation, the potential is there for at least a 50% total return in five years. So we see opportunity in that debt and in Asian countries.”

In the short term, Mordy also believes that emerging markets will re-establish their fundamentals. While trade-war uncertainty will likely continue into 2019, once investors realize that emerging markets are not going into recessions and the risks are limited, they will reassert themselves.

EMERGING MARKET UPS AND DOWNS 80

78.51%

MSCI Emerging Market Index annual returns

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18.88%

18.22%

11%

10 0

-2.6% -2.19%

-10

-14.92%

-18.42%

-20 -30 -40 -50

-53.33%

-60 2008

2009

2010

2011

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2013

2014

2015

2016

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27/11/2018 4:35:09 AM

SPECIAL REPORT

YEAR IN REVIEW

Cryptocurrency sees sharp decline After a boom in late 2017, cryptocurrency has fallen close to 80% this year – but experts aren’t ready to pull the plug just yet CRYPTOCURRENCY PRICES were on a roller-coaster in 2018. The ride began with a steep incline in late 2017/early 2018, followed by a sharp drop. As of September, the MVIS CryptoCompare Digital Assets 10 Index showed an 80% decline for the year.

Experts have cited multiple potential reasons for the decline, including security, regulation and market manipulation. Yet for some, the decline was simply a matter of normalization.

As president and portfolio manager at Rivemont Investments, Martin Lalonde oversees Canada’s only actively managed cryptocurrency fund. He notes that 2018 was mostly a down year, but he remains bullish on the sector’s long-term potential.

“We think 2018 was normal; 2016 and 2017 were very good,” Lalonde says. “Cryptocurrency is a very volatile asset class. Even though [Bitcoin] has dropped to about $6,500, we

hope it can hold and are bullish it can have another increase either later this year or next.

We view the volatility as a good thing because there is a correlation between volatility and

“We still have a long-term view on cryptocurrency and especially Bitcoin – any moment is a good time to invest in it” Martin Lalonde, Rivemont Investments returns. It means you can achieve returns that you might not be able to in other sectors.”

At this point, Lalonde has seen enough to believe that cryptocurrency is more than just a fad. “I think the sector is still growing,” he says. “More people are using cryptocurrency – it is becoming more accepted and moving in

CRYPTOCURRENCY’S 2018 HIGHS AND LOWS MVIS CryptoCompare Digital Assets 10 Index YTD return 400% 300% 200% 100% 0% Jan 2018

Apr 2018

Jul 2018

Oct 2018 Source: MVIS Indices

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the right direction.”

Lalonde has tried to balance out some of the risk in his fund by allocating a large portion of it to cash – the fund is currently 39.6% Bitcoin and 60.4% cash in order to protect capital. “Because we believe we are in a bear market [for cryptocurrency], the leaders will lose less,” Lalonde explains.

“For Bitcoin, they dropped from $20,000 to $6,500, but other cryptocurrencies lost much more. So we have a high portion of cash to protect capital.”

Despite the recent decline, Lalonde believes that Bitcoin will rebound, just as it has in the past. He also notes that the investors currently in the fund are aware of its volatility – something that all cryptocurrency

investors need to be willing to shoulder.

“Our investors know it’s a volatile sector, but they want to be exposed to it,” Lalonde says. “For us, we try to capture the uptrend.

Our goal is to technically analyze the trend and trade to run returns as high as possible.”

The potential to catch that upswing is why Lalonde still believes now is a good time to get into cryptocurrency. “We still have a longterm view on cryptocurrency and especially Bitcoin – any moment is a good time to invest in it,” he says.

Because cryptocurrency is so volatile, it can be difficult to predict the future, but Lalonde says nothing will surprise him.

“I wouldn’t be surprised if Bitcoin’s value reached half a million, but you just never know,” he says. “I do still see growth for it.

We believe that you might see something like 2017 again in a couple years. Long-term, we remain bullish because I think many currencies have found their bottom. Still, it could stay sideways for a year.”

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27/11/2018 4:35:22 AM 11-08-18 9:44 AM

Women in Wealth Management Awards The great strides women have made in the wealth management industry were on display at WPC’s first ever Women in Wealth Management Awards THE INAUGURAL Women in Wealth Management Awards graced the Beanfield Centre in Toronto on November 21, honouring women in the financial services industry who are making a significant contribution to their profession, community and clients. The first-of-its-kind event featured seven award categories open to female advisors, wealth professionals, executives, and the teams and organizations they manage.

The awards capped off the 2018 Women

in Wealth Management Summit, which promoted positive change in the financial advice sector while encouraging more women to enter the industry and take leadership roles.

Produced by Key Media International, the organization behind Wealth Professional Canada, and sponsored by Mackenzie Investments, the event was a huge success, with more than 260 participants at the conference and even more guests attending the awards.

Winners were chosen by a panel of industry

judges who determined which contributions were the most impactful.

Shannon Lee Simmons, founder and owner of the New School of Finance, walked away with the Mackenzie Investments Award for Woman Innovator of the Year. Other highlights included Raymond James financial advisor Filomena May winning Young Gun of the Year and Michelle Masson of MD Financial Management capturing Female Executive of the Year.

ETF CHAMPION OF THE YEAR MARY HAGERMAN HAGERMAN-ARCHAMBAULT GROUP (DESJARDINS SECURITIES)

The ETF Champion of the Year Award recognizes a woman who has gone above and beyond to advance the ETF industry in Canada. The award went to Mary Hagerman, a portfolio manager and investment advisor at Desjardins Securities.

“It feels great! I have been working for this for a long time, trying to get ETFs out there,” Hagerman said. “I have been plugging ETFs nonstop for almost 10 years. This year we made some important breakthroughs in the socially responsible investing [SRI] space, and we are looking forward to seeing more SRI in ETF forms. After the financial crisis, I had this deep rethinking of how I was doing my business and what was the best way to serve clients, to give them a good return over time at a low cost and maximize risk management.

The ETF space was growing at that time, and it answered my question of what was the best thing to do for my clients.”

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ETF CHAMPION OF THE YEAR WINNER MARY HAGERMAN Hagerman-Archambault Group (Desjardins Wealth Management)

FINALISTS ATSUKO (ANNIE) HIRAOKA Cougar Global Investments (Raymond James) DURAN GUEST Horizons ETFs ERIKA TOTH BMO ETFs PAT DUNWOODY Canadian ETF Association

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BROUGHT TO YOU BY

EXCELLENCE IN PHILANTHROPY AND CSR TRACEY MCGRATH MCGRATH TENPENNY WEALTH MANAGEMENT (RICHARDSON GMP) The Excellence in Philanthropy and CSR Award recognizes women or female-led firms that set new benchmarks of excellence in corporate social responsibility, philanthropy and community service. Thanks to her contributions to numerous causes both locally and internationally, Tracey McGrath, an investment advisor at Richardson GMP, took home the award.

“I am totally shocked because I know that so many people give back to the community, so to think that I was chosen, I’m very honoured and grateful,” McGrath said. “In the things that I do to give back, I try to touch on local and international work because I think it’s great to do work locally in the community and internationally as well. I am a Rotarian, which I absolutely love to be. I help with a local social entrepreneurial organization where it’s all about social investing. And I have been very involved in an organization in Africa, where one in four are still dying of AIDS in Lesotho. We have foster children and we are rolling out mobile health units there, which I am very involved in.”

EXCELLENCE IN PHILANTHROPY AND CSR WINNER TRACEY MCGRATH McGrath Tenpenny Wealth Management (Richardson GMP)

FINALISTS BONNIE LYN DE BARTOK MacCormick MICHELLE HASTICK-COWELL Mandeville Private Client PAT WEIR Lawton Partners Wealth Management SANDRA MACENKO MERKLEY Scotia McLeod SUSAN O’BRIEN BMO Nesbitt Burns

MARKETING AND COMMUNICATIONS TEAM OF THE YEAR HORIZONS ETFS

This award recognizes an outstanding female-led marketing and communications team. In 2018, investing in the marijuana sector was a hot topic, and leading a lot of the discussion was Horizons ETFs, which launched the country’s first marijuana ETF. Its marketing team’s efforts in bringing the fund to market helped them win Marketing and Communications Team of the Year.

“I think that winning this award is a catalyst for change in the industry,” said Tammy Cash, executive vice president and head of marketing at Horizons ETFs. “In my personal life, I sit on the board for Women and ETFs, so it is particularly special. To recognize marketing teams that are led by women is transformative. I am so proud to be a representative of women in the industry. “[Horizons ETFs was] responsible for bringing the world’s first marijuana ETF to market,” Cash continued, “and it involved every aspect of our marketing department, from the product side in terms of fund development, through to dealing with regulators and managing

MARKETING AND COMMUNICATIONS TEAM OF THE YEAR WINNER HORIZONS ETFS

FINALISTS GLC ASSET MANAGEMENT GROUP MANDEVILLE PRIVATE CLIENT SPRING FINANCIAL PLANNING WEALTHBAR

all of the advocacy that was required to ensure we could build an asset class. On the marketing and execution side, we did fantastic work, and I am very proud of the team.”

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28/11/2018 3:28:17 AM

YOUNG GUN OF THE YEAR

FEMALE EXECUTIVE OF THE YEAR

FILOMENA MAY FILO FINANCIAL SOLUTIONS (RAYMOND JAMES)

MICHELLE MASSON MD FINANCIAL MANAGEMENT

Young Gun of the Year is awarded to a female professional under 40 who has excelled at pushing the envelope with innovation and growth in the wealth management industry, garnering industry attention and the respect of her peers. Young advisors are more important than ever in the industry, and recognizing ambitious advisors sends a powerful message to a new generation of women that their contributions are invaluable. The winner of Young Gun of the Year was Filomena May, a Raymond James financial advisor who recently started her own branch and is now looking to make an even greater impact on the industry.

“Winning this feels pretty awesome!” May said. “You always hope that you win, but also prepare yourself that just being here is really important and a reminder of all of the accomplishments you have done in the business and community. It takes a lot of clarity in the direction you are going, perseverance and not giving up when times get tough.

“I just opened my own branch of Raymond James not even a month ago,” she continued, “so I am looking to build a team, continue community involvement and charity work, and also leadership and women’s empowerment. I started to mentor at the University of Calgary, so I just want to focus on making an impact, making a mark and teaching my children what it means to work hard and believe in what you do.”

YOUNG GUN OF THE YEAR WINNER FILOMENA MAY Filo Financial Solutions (Raymond James)

FINALISTS ASHLEY CURRIN Evans Wealth Management Team (Richardson GMP) DIAN CHAABAN RBC Dominion Securities EMILY BEN-HAIM Gluskin Sheff ERIKA TOTH BMO ETFs JANEA DIENO Brightrock Financial

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The Female Executive of the Year Award recognizes a female executive of an advisory firm or fund provider who has demonstrated exemplary vision and leadership over several years, as evidenced by insight, discernment and an ability to lead and inspire that has guided her organization to a new level of growth, achievement or recognition. This honour was awarded to Michelle Masson, executive vice-president at MD Financial Management, for her role in promoting women in the wealth management industry.

“I am blown away!” Masson said. “We spent the day hearing from so many talented women, hearing about life as a female in the wealth management industry. So for me to win something like this is an incredible feeling. To think about being a role model for younger women as they come up, I really hope that wealth management becomes an easier place for females to succeed, and I’d like to think I played a small part in that. I think events like Women in Wealth Management are super important. Community is what it is all about – we heard earlier today that it takes a village, and I think women and men need to get on board and help women be what they can be in this industry.”

FEMALE EXECUTIVE OF THE YEAR WINNER MICHELLE MASSON MD Financial Management

FINALISTS ALISON FLETCHER Mandeville Private Client CATHERINE DORAZIO Connor, Clark & Lunn Private Capital CATHERINE MILUM Manulife Investments CHERYL MUNRO The Great-West Life Assurance Company CHRISTINE HANLON Owens MacFadyen Group LISA CATHERWOOD BMO Global Asset Management LISE DUPONT National Bank Financial Wealth Management

LAURA MONEY Coutts Financial Services (Sun Life Financial)

TAMMY CASH Horizons ETFs

LAURA TUTTE Integrated Wealth Planning (TD Wealth)

TEA NICOLA WealthBar

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28/11/2018 3:28:21 AM

BROUGHT TO YOU BY

THE MACKENZIE INVESTMENTS AWARD FOR WOMAN INNOVATOR OF THE YEAR SHANNON LEE SIMMONS THE NEW SCHOOL OF FINANCE This award is given to a female trailblazer who has harnessed and maximized innovation to provide practical, effective and easily accessible tools to clients or significant stakeholders. The winner, Shannon Lee Simmons of the New School of Finance, was selected based on her overall business perspective, including value proposition, dedication to the field, accomplishments and accolades.

“This is very exciting!” Simmons said. “I had steep competition – everyone in the category was such a phenomenal, formidable woman. I am shocked! I am very happy but also very surprised.

“I think a couple of initiatives contributed to this,” she added. “One, we have a really original business model within the family financial planning space, so getting creative and innovative with how we manage our operations team has been helpful. We also have a digital platform, which is our online school for financial literacy. It has helped us turn a service-based business into a scalable one. I think the combination of those, along with our use of social media, has been the trifecta, which gave to the innovation that won this award.”

THE MACKENZIE INVESTMENTS AWARD FOR WOMAN INNOVATOR OF THE YEAR WINNER SHANNON LEE SIMMONS The New School of Finance

FINALISTS CHANTAL MCNEILY Sun Life Financial DONNA BRISTOW Broadridge Financial Solutions JENNIFER SCHELL CIBC Wood Gundy JULIA CHUNG Spring Financial Planning TEA NICOLA WealthBar

WOMEN-LED ADVISOR TEAM OF THE YEAR MARBACH WEALTH MANAGEMENT NATIONAL BANK FINANCIAL WEALTH MANAGEMENT The final award of the evening was for Women-Led Advisor Team of the Year. Recognizing client retention, customer service, financial results, staff development and retention, value proposition, and recent achievements, the award went to Marbach Wealth Management, part of National Bank Financial Wealth Management. Joyce Marbach, SVP and portfolio manager at Marbach Wealth Management (pictured above), attributed the win to her firm’s long-standing relationships.

“This is an amazing recognition of the team that I have worked with for 30 years,” she said. “We have one goal, and that is to do the best thing for our clients. The team buys into that goal, and every day, that is what we work for. Holly Ripplinger has been with me for almost 25 years, Cathy Willner has been with me 24 years, and I am lucky that my daughter has also joined me. I think that’s huge that we have such a continuity and pretty much read each other’s minds – we know what needs to be done to get the job done.”

WOMEN-LED ADVISORY TEAM OF THE YEAR WINNER MARBACH WEALTH MANAGEMENT National Bank Financial Wealth Management

FINALISTS ALEXANDRA HORWOOD & PARTNERS Richardson GMP

KINGSFORD & ASSOCIATES BMO Nesbitt Burns ROBYN K. THOMPSON TEAM Castlemark Wealth Management THE SUSAN O’BRIEN GROUP BMO Nesbitt Burns THE SUSAN STOBART TEAM Lawton Partners

DFS PRIVATE WEALTH Mandeville Private Client GIESBRECHT SNYDER TEAM Harbourfront Wealth Management

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28/11/2018 3:28:28 AM

SPECIAL PROMOTIONAL FEATURE

WOMEN IN WEALTH MANAGEMENT

Gender diversity in the financial industry Industry veteran Tuula Jalasjaa talked to WPC about the challenge of getting more women into the wealth management industry

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‘Women Invest Differently’ campaign.”

Since working with Mandeville, Jalasjaa has helped the firm launch and roll out its WealthPort robo platform, which provides access to quality private and alternative investments typically reserved for wealthy and institutional investors. Giving retail investors access to these types of investment opportunities is something Mandeville has become known for, and WealthPort is the first and only robo platform in Canada to offer such access.

THE WEALTH MANAGEMENT GENDER GAP A 2017 Morningstar report on US-based fund managers by gender shows that the gap between male and female fund managers remains large.

Women Men Number of fund managers

ON THE HEELS of Wealth Professional Canada’s Women in Wealth Management Summit, the financial industry is looking to create more opportunities for women in the field. Tuula Jalasjaa is one industry veteran who has paved her own way to the top. From leading HollisWealth to her current role as a member of the board of directors for Mandeville Private Client, Jalasjaa is always looking to promote women in the industry.

When she first began working with Mandeville, Jalasjaa was pleasantly surprised by the diversity of the company’s leadership team. “It was so refreshing to see women represented at senior level,” she says.

Jalasjaa also discovered an appreciation for Mandeville’s Advisory Council, which actively recruits women to insure well balanced input.

“Mandeville has an entrepreneurial environment, which is great for female advisors looking for flexibility and opportunities to differentiate and grow their practices,” she says. “I have always been supportive of women, and Mandeville is in alignment, as they are committed to and supportive of women specifically with respect to increasing female financial literacy internally amongst their advisors, and externally, as shown most recently via their

Thanks to her work with Michael Lee-Chin and his group of companies, Jalasjaa has also had the opportunity to work on other female investor initiatives around the world.

“The initiatives are largely focused on female education – taking what I have learned and know about women investors and helping them to build confidence,” she says. “Some countries present big opportunities, and I am pleased to advance these causes outside of Canada.”

While Jalasjaa has found personal success, she does acknowledge that there are numerous challenges for women entering the wealth management industry. “I would say the fact that it is still a male-dominated environment can be intimidating for some women,” she says.

“At times, women may take their foot off the gas when they should be speeding up.”

Another challenge Jalasjaa still sees for women is achieving the right work-life balance. “I think that generally, women are still taking on the balance of work at home, and many now also care for elderly parents,” she says. “I know that for many women in the industry, finding enough time to get everything done both personally and professionally is stressful and difficult.”

That’s why Jalasjaa feels it’s so important to carve out a voice for women in the industry.

While events such as the Women in Wealth Management Summit are helpful, she feels can be done. “There aren’t many forums for women in the industry to raise their voices,” she says.

Personally, Jalasjaa found success by using

8,000 7,000 6,000 5,000 4,000 2,000 1,000 0

1990

1995

2000

2005

2010

2015 Source: Morningstar

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HOW WOMEN INVEST A 2017 CIBC poll examined the preferences of female investors. As Jalasjaa explains, women invest differently, and the wealth set to transfer to them will create opportunities for female advisors who understand their needs.

WHAT’S IMPORTANT TO FEMALE INVESTORS? Safety

72% Socially responsible investments

69% Growth

58% Liquidity

33% HOW WOMEN FEEL ABOUT INVESTING Knowledgeable

inequality in the industry to her advantage.

“I ignored the gender inequality and capitalized on it,” she explains. “I took my female strengths and used them to add value in ways men could not. I also ensured I had a strong voice. I got involved in a number of women in wealth initiatives over the years, which I saw as an opportunity. Another thing that was instrumental was that I built a solid network of both men and women and looked to female role

helps you grow. The other thing is to have a framework and focus. I think the more focus you have, the greater your success.”

Now more than ever, Jalasjaa sees a need for more women in the industry. As more practices move toward a holistic approach, she sees the skills that women bring to the table as a huge value to investors.

“There is a tremendous opportunity for female advisors right now,” she says. “There can

“I ignored the gender inequality and capitalized on it. I took my female strengths and used them to add value in ways men could not” Tuula Jalasjaa, Mandeville Private Client models in the industry for inspiration.”

Jalasjaa has some advice for those looking to find similar success.

“I think the opportunities are greater than they ever have been,” she says. “I think women need to help bring each other into the industry and help in each other’s success. I always advise women – and men – to find a mentor. Mentors can provide a lot of constructive feedback that

be a lot of flexibility when growing a practice, and it allows you to control your business.”

With $22 trillion in wealth expected to transfer into the hands of women by 2020, it’s critical for advisors to focus on this underserved market. There is an opportunity for advisors to adapt their marketing messaging and value proposition to better resonate with women’s unique circumstances and challenges

49% Confident

54% Nervous due to volatility in the stock market

70% Source: 2017 CIBC Women & Investing poll

regarding wealth.

“Mandeville understands that women invest differently, and our advisors proactively work with their female clients to make them aware of the challenges – caring for others, gender wage gaps – that they might face throughout their lives that might impact their financial goals and provide access to personalized strategies and solutions,” Jalasjaa says. “Females have some unique strengths and soft skills, which are appealing to many investors. They tend to be patient, listen more and be more holistic when looking at the wealth management situation of a client. Women can do extremely well in these roles, and I hope there are more coming in to take advantage of the opportunity.”

Moving forward, Jalasjaa feels the industry can take more steps in order to encourage more women to enter. As they become more prominent, she believes it will only add to the promotion of women into leadership roles.

www.wealthprofessional.ca

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28/11/2018 3:34:49 AM

PEOPLE

ADVISOR PROFILE

Putting in the work Elie Nour is using his experience in the financial industry to help future advisors gain a foothold in wealth management

WITH 13 YEARS in the financial industry behind him, Elie Nour has learned a thing or two. He’s been forced to adapt to major changes to regulations and technology, and in September, he celebrated the launch of his firm, Nour Private Wealth, as an independent IIROC dealership with locations in Oakville, Toronto and Montreal. Yet Nour’s greatest accomplishment might be using his experience to mentor the next generation of advisors as his firm continues to grow.

After graduating from McGill University with a degree in economics, Nour knew he wanted to get involved in wealth management. At a job fair, he met with Berkshire Securities and was immediately interested in working for the company. He was told to go work at a major bank and get six months of experience, but Nour was eager to expedite the process.

“After a couple months, I met one of my friends who was working for Berkshire,” he says. “I told him, ‘Do whatever it takes to get me an interview.’ I ended up interviewing with the same person who told me to go get the experience. He didn’t recognize me, but he saw how driven and hungry I was to succeed and hired me.”

From the start, Nour made an impact at Berkshire, breaking records in his first year.

He kep that momentum going when the firm

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was acquired by Manulife Securities in 2007.

Nour also continued to expand his own skills, earning his insurance designation in 2008, CFP in 2012 and CIM in 2016.

As his team and client base grew, Nour added a new location in Oakville, Ontario, in 2013, moving from Montreal to the area with his family. Nour soon recognized that in order to have skilled advisors under him, he needed to ensure they were being properly prepared for the industry.

“I think it’s important for new advisors entering the business to pick the right mentors,” he says. “It’s all about getting the proper training from the right people.

There’s a lot of advice out there, but a lot of it isn’t the right advice.”

In addition to hiring “established advisors who want to take their business to the next

level,” Nour Private Wealth also welcomes new entrants to wealth management, offering them a thorough training program.

“For new advisors, we put them through what we call ‘school,’ where we cover a variety of topics,” Nour explains. “Then they are assigned to work with one of the senior advisors, who train the associates. Typically, it takes about 12 to 18 months for an associate to become fully licensed. While they are training, they take part in all aspects of the business. Once they are licensed, we start moving accounts over to them. I meet with senior advisors on a monthly basis, all advisors every three months, and we have a weekly meeting with associates. We are on top of things the whole time.”

That approach to mentorship is one of the factors behind Nour’s success. It’s also some-

AND THE WINNER IS …

Throughout his career, Elie Nour has been recognized for his work by numerous organizations. He has been named to Wealth Professional Canada’s Top 50 Advisors list every year since 2014, and he also received the Wealth Professional Award for New House on the Block in 2015. During his time at Manulife Securities, Nour won multiple company-wide awards, including the Ovation Award, Top Advisor, President’s Circle, Circle of Excellence, Best Work Ethic and Top Absolute Percent Increase in AUA. At Berkshire, he earned Rookie of the Year in 2005 and Exceptional Effort and Outstanding Achievement awards in 2006 and 2007.

www.wealthprofessional.ca

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FAST FACTS: ELIE NOUR

PRACTICE Nour Private Wealth

LOCATIONS Montreal, Toronto and Oakville

YEARS IN THE INDUSTRY 13

“I think it’s important for new advisors ... to pick the right mentors. It’s all about getting the proper training from the right people. There’s a lot of advice out there, but a lot of it isn’t the right advice” thing other advisors have taken notice of – he’s already had interest from others looking to join his newly independent firm.

While Nour has an eye on continued expansion, he’s currently focused on ensuring that his team is prepared for what might come. Believing the bull market will fade by 2020, Nour says his team will prepare by

scaling back on equities and increasing their fixed-income position.

“Over time, we think interest rates will keep going up,” he says, “so [the fixedincome] portion of the portfolio is smaller but will boost performance. Every penny in the account needs to be working hard.”

Hard work is also something Nour

EDUCATION Degree in economics with minors in management and Hispanic studies from McGill University

CERTIFICATIONS CFP, CIM

expects from every member of Nour Private Wealth. It’s why he feels his firm has been successful, and it will be key to maintaining momentum as an independent firm.

“We put everything into training our advisors to make sure they succeed,” he says.

“If they are serious about it, we will be more serious about training them.”

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SPECIAL PROMOTIONAL FEATURE

HOLISTIC FINANCIAL PLANNING

Taking a team approach IG Private Wealth Management advisors Angelo Manzo and Gary Berardinelli spoke to WPC about how they rely on a team of specialists to offer more value to clients IN RECENT years, Investors Group has taken on a new direction. The company hired a new CEO, Jeff Carney; rebranded to IG Wealth Management; and created a new division, IG Private Wealth Management.

Gary Berardinelli and Angelo Manzo lead one of the select practices under the IG Private Wealth Management banner, and they say the firm’s new direction has helped them enhance their approach, service and value to clients.

“The new division was based around a strong financial planning culture,” Manzo says. “We have specialists in taxation, estate planning, lawyers and an entourage of others to deal with all the complicated financial issues that clients may have.”

Berardinelli and Manzo have built their business model around holistic financial planning. “We see other firms focus on

money management and investments – we do that, too, but we look at the big picture,” Berardinelli explains. “We find the cracks and fill them in. We believe relationships need to be the core value. Everyone has products, and from one entity to another, they are similar, but with us, the client experience is different.”

A key part of that differentiation is the fact that Manzo and Berardinelli have their own internal specialists on their seven-person team, as well as specialists at the regional and corporate levels to deal with tax issues. Those resources have proved to be a strength for IG Private Wealth Management as it aims to be a client’s one-stop shop.

Another strength has been IG’s removal of fees to move money in or out of its products. “It gives us the flexibility to shift around a client’s plan with no penalty,” Manzo says.

“When clients meet with us, they open up financially as well as emotionally, trusting us to understand what is truly important for them. For us, it’s about more than just the numbers” Gary Berardinelli, IG Private Wealth Management 44

Working primarily with business owners, medical professionals and successful retirees, Berardinelli and Manzo pride themselves on being good listeners.

“When clients meet with us, they open up financially as well as emotionally, trusting us to understand what is truly important for them,” Berardinelli says. “For us, it’s about more than just about the numbers. Although we are both licenced as financial planners, we pride ourselves on being client-centric and knowing when to bring in our specialists.”

The practice ensures that every client has a written financial plan, which is determined by listening to a client’s goals and figuring out the best way to achieve them.

“A lot of advisors say they do that, but unless you have this team approach, it’s almost impossible to do so as a one-person shop,” Manzo says. “Too often, advisors are not able to identify tax and estate planning issues for their clients. It’s our job to find and bring those issues to the client’s attention. Clients don’t know what they don’t know, so we inves-

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27/11/2018 4:12:41 AM

A BRIEF HISTORY OF INVESTORS GROUP 1926 Investors Group is founded

1940 Launches first Canadian product, the Series One Installment Certificate

1950 Launches first mutual fund in Canada

1955 Introduces the concept of dollar cost averaging

1962 Launches first international mutual fund

1972 Develops the personal financial review

1986

“We have specialists in taxation, estate planning, lawyers and an entourage of others to deal with all the complicated financial issues that clients may have” Angelo Manzo, IG Private Wealth Management

Power Financial Corporation becomes the parent company of Investors Group

1995 Introduces personal financial planning software

1997 Investors Group joins Great-West Life as part of its purchase of London Life

2001 tigate and take the extra steps necessary.”

Being named to the IG Private Wealth Management division was a great accomplishment for Berardinelli and Manzo. Out of more than 4,000 IG advisors in Canada, only 185 are under that banner. “Being able to announce it to our clients was an honour,” Berardinelli says. “Assuring high-net-worth individuals that they are dealing with some of the top advisors in the country was great and confirmed to us that we have been doing things right.”

The acknowledgement is even more special in light of the fact that Berardinelli

and Manzo can trace their friendship back to high school. Manzo began his career as a chartered accountant at Deloitte & Touche before moving to Investors Group in 1998.

Berardinelli earned a bachelor of commerce degree and began his career in wealth management in 1994. Now, with more than 40 years of experience between them, the duo is looking ahead.

“Not many advisors at our age have the same level of experience,” Berardinelli says. “We are excited about the future and for what the next 20 years have in store for our clients.”

Investors Group acquires Mackenzie Financial Corporation, and Jeffrey Orr becomes the sixth president of Investors Group

2014 Becomes a signatory to the United Nations-supported Principles for Responsible Investment

2017 Joins with Mackenzie Financial to create a single global investment entity

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SPECIAL PROMOTIONAL FEATURE

HEALTHCARE

In good health Middlefield Group’s Dean Orrico explains why now is a good time for advisors to add healthcare investments to client portfolios

AS THE CANADIAN population continues to age, the need for healthcare products and services will only increase. According to Statistics Canada, there were 5.9 million Canadians aged 65 and older as of the 2016 census; by 2031, that number is set to reach 9.6 million.

Dean Orrico, president and CIO of Middlefield Capital Corporation, believes the aging population is just one of many reasons to invest in the healthcare sector.

“The healthcare sector is an increasingly important part of the market because of demographics and products that are very much needs-based,” he says. “Historically, the returns generated by healthcare equities are higher with less risk. When I look at the sector today, it is actually trading at a discount valuation compared to the broader market. Not only am I getting healthcare companies that generate growing revenues and high levels of profits, I’m getting them at a lower valuation.

So in this environment, they are deemed to be more defensive.”

Investing in healthcare is not black and white. Orrico breaks down the sector into five subsectors. The first and least risky is managed

46

care, which includes things like health insurers. Next on the risk spectrum are healthcare REITs, which include medical office buildings, nursing homes and retirement homes. In the middle are companies that manufacture diagnostic equipment and supplies. Next, with slightly more risk, are

accounts for only 2% of the TSX, while in the US, it makes up 15% of the S&P500.

Middlefield manages three healthcare funds. The Global Healthcare Dividend Mutual Fund is broadly diversified across the spectrum, minus biotech; the Healthcare & Wellness Dividend Fund has a 50% to 60% weighting in healthcare and the remainder in wellness companies; and the Healthcare & Life Sciences Dividend Fund incorporates all of the healthcare segments, including 25% in biotech.

To help construct its funds, Middlefield has partnered with US-based medical research firm SSR Health. “The partnership with SSR has been very beneficial,” Orrico says. “They do proprietary research on healthcare, and it helps us identify companies, specifically in pharma and biotech, that we can include in the portfolio.” SSR also helps Middlefield navigate the ongoing implications of regulatory and political changes the healthcare sector.

As of the end of September, the three funds were averaging returns of close to 20%. That led Middlefield to convert the Healthcare & Life Sciences Dividend Fund into an ETF. “We are seeing that more advisors and investors are comfortable with ETFs in portfolios,” Orrico says, “so we determined that the ETF platform would be the best way to grow the fund. We still see the opportunity to put

“When I look at the [healthcare] sector today, it is actually trading at a discount valuation compared to the broader market” Dean Orrico, Middlefield Group pharmaceutical companies, which are typically larger and generate significant revenues and cash flow. Finally, the most risky aspect of the sector is biotech – companies that don’t generate much in profits because their cash flow is dedicated to the research and development of new drugs.

Orrico notes that Canadians need to look outside the country’s borders to gain healthcare exposure. He points to the fact that healthcare

more money to work.”

That optimism is reflected in Orrico’s general outlook for the sector. “When I take all of the factors – a growing sector; aging demographics; strong revenue and earnings; deemed to be defensive; and that long term, these are needs-based products - I think the outlook for healthcare investing is excellent,” he says. “Investors need to have exposure to the healthcare sector in their portfolios.”

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PEOPLE

CAREER PATH

FORWARD THINKING From the start, Dave Chellew’s career has been defined by a willingness to embrace what’s next

Having joined the army at age 17, Chellew faced a choice when a training accident forced a medical release “I had to choose a professional school and couldn’t afford to go out of town, so I had to choose Nipissing University – and the only program they had was commerce. I transferred to Laurentian after two years – there were 250 in the first-year class, but only 50 graduated”

1978

STUDIES COMMERCE

1987

MOVES INTO TEACHING A desire for change and a dose of chutzpah led Chellew into teaching “I was ballsy: I walked into the school of continuing education at Cambrian College and suggested I could be good at this – and I was teaching a week later. I discovered I could motivate students. I came off as self-confident and gregarious; it was only in the classroom that I came to understand that what I projected was who I really was.

Teaching was life-changing”

1996 DEVELOPS A UNIQUE STYLE Chellew was drawn back into teaching when Laurentian University invited him to teach the one course he didn’t pass as a student “The gods smirked at me. I had to teach myself before teaching the students, so I developed a style that was uniquely my own – I could take a complex subject and simplify it”

2007 FINDS THE PERFECT FIT Chellew describes stepping into the position of portfolio manager with Burgeonvest Bick Securities as a transformative experience “June 6, 2007, was liberation day for me. [My position as portfolio manager] became a marriage of my gregarious nature, my intellect, my academics – everything came together. I was no longer having my world interpreted for me, but able to come to my own decisions and conclusions”

1983

BECOMES A BROKER Three weeks at an accounting firm was enough to convince Chellew that the field wasn’t for him.

He tried a role at an investment brokerage next, but struggled “I lacked the self-confidence to really embrace it. I never felt comfortable being a broker. I didn’t like the selling; I didn’t like to talk to people – I was terrified of rejection”

1995

RETURNS TO THE INVESTMENT WORLD After failing to find a brokerage firm that would put him through training, Chellew returned to the industry as an independent investment advisor

“I came back to the industry because I missed it, and I learned from teaching that I had a social skill set, so I wasn’t scared anymore.

The rules had changed, but you adapt. It’s a changeable world with constant adjustments” 2000

GOES OUT ON HIS OWN Five years into his second stint in the investment industry, Chellew was ready to strike out on his own, founding Genesis Planning early in the new millennium. In his first year, he grossed more than $1 million “I was under a lot of pressure to build a branch, which is the quickest way to go broke. I was working from 6 a.m. until 9 p.m. every day, and the economics meant I couldn’t break even. I shut the office down and in 2003 transitioned from Sudbury to Toronto”

Dave Chellew is a portfolio manager with Industrial Alliance Securities Inc., which is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada.

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PEOPLE

OTHER LIFE

4:45 a.m.

Time Carnovale wakes up to teach his 5:30 a.m. class

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

10

Typical size of one of Carnovale’s CrossFit classes

30

“Coaching is where my passion lies,” Carnovale says. “It’s exhilarating watching people cha nge a nd being a small part of the m leading a better life”

Number of kettlebells in the gym where Carnovale coaches

HEAD COACH Coaching is central to Andrew Carnovale’s life, whether he’s counselling clients on their financial options or leading a CrossFit class ANDREW CARNOVALE, an Ontariobased relationship manager at Nest Wealth, was first introduced to CrossFit nine years ago via a free training session at the large chain gym where he worked.

He was instantly hooked on the multidisciplinary sport.

“If you have a competitive spirit,

48

you will dive in,” he says. “If you have a passion for improving and working out in a group with others to push you, CrossFit scratches that itch.”

His enthusiasm for CrossFit proved to be contagious. He started out by helping friends informally, then providing assistance to those who approached him for

help at the gym, and ultimately acquiring certification to become a CrossFit coach.

“It took me a while to realize that my true passion was for helping people,” Carnovale says. “The investment industry is notoriously complex, and at work, I help people sort through it. I look at CrossFit in the same way.”

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