FACTOR-BASED INVESTING
How to use factor-based ETFs to meet a variety of investment goals
THE ECONOMIC IMPACT OF HOUSEHOLD DEBT
Will Canada’s high debt levels spell trouble for the economy? WWW.WEALTHPROFESSIONAL.CA ISSUE 7.05 | $12.95
FIXED INCOME THROUGH ETFs
A simple, effective way to increase clients’ fixed-income exposure
INDEPENDENTS Seven of Canada’s top independents reveal how to build a thriving practice on your own
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ISSUE 7.05
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CONTENTS
@WealthProCA facebook.com/WealthProCA
UPFRONT 02 Editorial
How to win over DIY investors
FEATURES
36
FOCUSING ON FACTORS
24
How factor-based investing can help you meet a wide range of investment objectives
INDUSTRY ICON Mandeville Private Client SVP and COO Frank Laferriere is passionate about his firm’s mission to democratize institutional-style investing
18
06 Statistics
Despite a recent shift toward ETFs, mutual funds still reign supreme
08 News analysis
Is high household debt a harbinger of doom for Canada’s economy?
10 Intelligence
This month’s big movers, shakers and new products RBC seeks to make ESG a central component in Canadians’ portfolios
ELITE INDEPENDENTS
PEOPLE
Advisors reveal their top picks in fixed income
12 ETF update
SPECIAL REPORT
WPC talked to some of Canada’s top independent wealth management practices to find out how they’ve achieved success by doing things their own way
04 Head to head
FEATURES
40
FIXED-INCOME EXPOSURE THROUGH ETFs
Efficiently increase clients’ fixedincome exposure by taking advantage of ETFs
14 Alternative investment update The Quadriga case has put increased scrutiny on cryptocurrency platforms
16 Opinion
Advice for maximizing tax savings on estate transfers
PEOPLE 42 Advisor profile
Nader Hamid relies on the diverse strengths of his team to provide a full wealth management experience
46 Career path
Emily Ben-Haim has built an impressive career by never hesitating to take advantage of a good opportunity
FEATURES
44
TAPPING INTO PRIVATE DEBT
Get to know a market that can provide investors with both reduced volatility and substantial returns
48 Other life
Taking flight with kitesurfer and fintech CEO Trevor Gary
WEALTHPROFESSIONAL.CA CHECK IT OUT ONLINE www.wealthprofessional.ca
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UPFRONT
EDITORIAL wealthprofessional.ca
Cutting through the noise
O
ne of the biggest challenges advisors face today is cutting through all the media noise for investors. Investors are bombarded with headlines about sectors, industries and individual stocks, which can make it quite difficult for them to make decisions about their own financial situation. What makes this even more detrimental to the wealth management industry is that this increased access to information goes hand-in-hand with the rise of robo-advisors. This combination of information and technology is giving investors the idea that they can better handle their investments themselves. Robo-advisor companies are even trying to capitalize on the trend. Take Questrade’s recent ad campaign, which focuses on investors moving their investments away from their advisors for reasons such as fees. This can be quite misleading for investors because they don’t realize the benefits advisors provide.
What the media noise and roboadvisors don’t take into account is the human element of financial planning
ISSUE 7.05 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 Mike Connon
ART & PRODUCTION Designer Marla Morelos Production Manager Alicia Chin Traffic Manager Ella Dayandante
Sales Executive Alan Stewart Vice President, Sales John Mackenzie Project Coordinator Jessica Duce
CORPORATE President & CEO Tim Duce Office/Traffic Manager Marni Parker Events and Conference Manager Chris Davis Chief Information Officer Colin Chan Human Resources Manager Julia Bookallil Global COO George Walmsley Global CEO Mike Shipley
EDITORIAL INQUIRIES
darren.matte@keymedia.com
As an advisor, your response might be to increase your value proposition – a phrase that often echoes around the industry. But the key to doing this is actually showing your value to clients so they know what it looks like. What the media noise and robo-advisors don’t take into account is the human element of financial planning. This can be a good opening with clients – showing them that you’re more than just someone who sells a particular product. Another way you can show value is by incorporating technology to better communicate with clients. Giving clients access to their investment performance lets them to feel more in control, as they would with a robo platform, while allowing you to remain part of the process. The influx of information and the rise of self-directed investing are significant challenges for the industry, but for the most part, advisors are adapting. Enhancing engagement with your clients any way you can will help to communicate your value. Once a client understands how you’re helping them, over the long run, they’ll be able to tune out the noise.
The team at Wealth Professional Canada
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YOU’VE BUILT YOUR BUSINESS ON RELATIONSHIPS. SO HAVE WE.
At iA Securities, we believe helping you invest in your clients begins and ends with investing in you. Because, like you, we understand the importance of personal relationships – and how fundamental they are to your business. It’s why we offer advisors more autonomy and control, so you can continue doing right by your clients everyday.
Greater freedom. Better support. More rewards. joiniasecurities.com
INVESTED IN YOU. Industrial Alliance Securities Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada. iA Securities is a trademark and business name under which Industrial Alliance Securities Inc. operates.
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UPFRONT
HEAD TO HEAD
Which areas of global fixed income are most attractive? After equity markets plunged in late 2018, attention turned back to fixed income. So where are advisors looking for exposure?
Joseph Bakish
Sean Ryder
Mike Gomes
Vice-president and portfolio manager Bakish Wealth, Richardson GMP
Senior executive financial consultant Loreto Ryder & Associates Private Wealth Management
Financial planner Ironshield Financial Planning
“At this stage of the credit cycle, the additional yield to be earned by owning lower-quality bonds is quite low. In addition, rates have risen in the US, giving high-quality corporate bonds and government bonds a decent yield with the potential for capital gains should rates drop. While they don’t offer the projected income we got used to seeing in the 1990s, we believe some diversification benefits will continue to add to Canadian portfolios, in particular, owning highquality US corporate and government bonds. After a six-month rally, we would aim to keep duration relatively short.”
“I am focused on providing a range of managed solutions – including global fixed-income exposures – to build diversified portfolios designed to help clients achieve the investment objectives set out in their financial plan. Overall, the benefit of building a diversified portfolio doesn’t change, even in a low-rate environment.” I like to take advantage of global fixed-income opportunities as they arise. My solutions include investments with the flexibility to adjust their interest rate, duration, credit, and currency exposures, never overweighting one component, as diversification is the key to success in the long term.”
“Overall, fixed income has been a challenging asset class due to the low and rising interest rate environment of the last few years. Although many portfolio managers currently have fixed-income positions below their target benchmark, some are capitalizing on the higher yields that emerging market fixed-income investments are currently providing. With the downward pressure on traditional fixed income, it’s important to explore integrating complementary alternative fixed-income strategies such as private debt, market-neutral investments and properly structured permanent life insurance solutions to our clients’ holistic financial plans.”
BEYOND BONDS At the end of a year in which the Dow Jones Industrial Average fell 5.6%, the S&P 500 took a dip of 6.2% and the Nasdaq Composite dropped 4%, investors looking for safe havens sparked a move to fixed income. But today’s fixed-income products go well beyond traditional government bonds in an attempt to deliver yield. In early April, for example, European fixed-income ETF provider Tabula Investment Management launched the Tabula JP Morgan Global Credit Volatility Premium Index UCITS ETF, which aims to generate yield by capturing the difference between realized and implied volatility in credit default swap index options markets. “Investors are very keen to find new sources of return that are structural and have limited correlation to other market index investments,” Tabula CEO Michael John Lytle said when announcing the product’s launch.
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“I want an asset manager with retirement strategies to help me support my clients’ needs.” At TD Asset Management, we know advisors expect more. That’s why at TDAM, we’ve developed an online Retirement Resource Centre to best serve advisors and their clients. Take retirement planning. Through our online Retirement Resource Centre, you can access client-centric tools and thought leadership on retirement strategies that could help you build a better tomorrow for your clients. Learn more at tdadvisor.com
Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the fund facts and prospectus, which contains detailed investment information, before investing. Mutual funds are not guaranteed or insured, their values change frequently and past performance may not be repeated. TD Mutual Funds and the TD Managed Assets Program Portfolios are managed by TD Asset Management Inc., a wholly owned subsidiary of The Toronto-Dominion Bank, and are available through authorized dealers. ®The TD logo and other trade-marks are the property of The Toronto-Dominion Bank.
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UPFRONT
STATISTICS
Mutual funds still dominate
SIZE MATTERS
Even with the rise of ETFs, the majority of global investments still reside in mutual funds MUCH OF the talk in the investment industry over the past several years has centred around the rise of ETFs as a popular vehicle for investors, specifically new investors. However, despite the recent surge in popularity, the ETF industry is still only about a tenth of the size of the mutual fund industry – and that’s true both in Canada and worldwide. While ETFs outsold mutual funds in Canada
in 2018, it’s going to take a while for ETFs to surpass the dominance that mutual funds have long enjoyed. The sheer size of the mutual fund industry ($1.4 trillion in Canada alone, compared to ETFs’ $157 billion) makes it hard to imagine a time when they will play second fiddle, even if the transfer of wealth from baby boomers to millennials results in significant inflows to ETFs.
$50.1 trillion $1.5 trillion Global mutual fund assets (open-end) as of December 2018
Canadian mutual fund assets as of February 2019
45%
ETFs have been the darlings of the investment world for a number of years and have been gaining significant ground in terms of inflows. Yet when looking at the distribution of investments in Canada, the mutual fund industry continues to be roughly 10 times the size of the ETF industry based on AUM, even with its slower growth in recent years.
114,130
US share of global mutual fund AUM
Number of regulated open-end mutual funds worldwide Sources: ICIGlobal.org; Stastisa.com; IFIC Overview, February 2019
A PREFERENCE FOR EQUITIES A look at the global allocation of mutual fund investments by asset class reveals that equity mutual funds still make up more than half of the space.
SLOW BUT STEADY GROWTH In contrast to the ETF industry, where the number of new products has increased sixfold since 2009, growth in the mutual fund industry has been more restrained – but it is still growing, adding a total of 838 new funds between 2009 and 2018. 3,500 3,102
2,999
3,000 2,616
2,699
3,240
3,291
3,288
3,454
3,018
2,862
2,500 2,000 Equity 54% Bond 20% Balanced/mixed 13% Money market 12% Other 8% Real estate 2%
1,500 1,000 456
500 0
107
157
2009
2010
227
264
283
2011
2012
2013
Total number of mutual funds Source: ICIglobal.org
6
340
374
2014
2015
2016
554
2017
660
2018
Total number of ETFs Source: IFIC Investment Funds Report 2018
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$1.5trn
$1.48 trillion
$1.34 trillion $1.23 trillion
$1.14 trillion
$1.2trn
$1.42 trillion
$999 billion $850 billion
$900bn $778 billion
$695 billion
$770 billion
$600bn
$300bn
$38 billion
$31 billion
$0
2009
2010
$43 billion
2011
$77 billion
$63 billion
$56 billion
2012
$90 billion
2013
2014
Canadian mutual fund industry AUM
2015
$157 billion
$147 billion
$114 billion
2016
2017
2018
Canadian ETF industry AUM
Source: IFIC Investment Funds Report 2018
CANADA’S BEST-PERFORMING MUTUAL FUNDS
NET SALES DOWN
RBC and Fidelity lead the pack for three-year returns in equity mutual funds, while Sentry and Franklin Bissett scored the top three performers in fixed-income funds.
Overall, mutual fund sales, including redemptions, have been dropping since the summer of 2017, despite the industry growing from $1.42 trillion to $1.51 trillion during that time.
TOP THREE-YEAR RETURNS, EQUITY
TOP THREE-YEAR RETURNS, FIXED INCOME
15
5
12.65% 12
11.98% 11.91% 11.91% 11.86%
4
4.63% 4.59%
4.27% 4.17% 4.11%
February 2019
Balanced
February 2018
$1.65 billion $4.54 billion
9
3
6
2
3
1
0
RBC Private Canadian Mid-Cap Equity Pool Series O
Fidelity Fidelity Fidelity RBC Private Canadian Canadian Canadian Canadian Mid-Cap Opportunities Opportunities Opportunities Class Class Fund Equity Pool Series P2 Series P3 Series P3 Series F
0
Equity $54 million $1.4 billion
Bond $1.92 billion $152 million Sentry Franklin Sentry Canadian Bissett Core Canadian Bond Fund Plus Bond Bond Fund Series I Fund Series O Series P
Cambridge Bond Fund Class I
Mackenzie Strategic Bond Fund Series O
Source: Fundata.com, as of April 30, 2019
Specialty $442 million $276 million Source: IFIC Industry Overview, February 2019
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UPFRONT
NEWS ANALYSIS
Seriously indebted Record levels of household debt in Canada, along with the risk of interest rate hikes, have experts discussing what this means for the national economy
THE AVERAGE Canadian household’s debt has reached historic levels. Statistics Canada reported that the household debt service ratio rose to 14.87% in the fourth quarter of 2018, matching a record high. This figure has many experts wondering how much the economy can take in relation to interest rate increases. For now, the Bank of Canada has put a hold on further rate hikes, but many believe this is merely a reaction to the selloff in the final quarter of 2018. As the market readjusts in 2019, the BoC could return to rate increases towards the end of the year. The topic of just how much growing household debt could impact economic growth
the growth of the Canadian economy. The panel discussed how Canada’s household debt rates, which are now equal to or higher than those in the US, could not have been predicted by experts a decade ago. These high debt levels, combined with rising interest rates, could soon cause individuals to feel the pinch. Given the pace of consumption, experts fear the economy may not be able to sustain its current growth rate. This notion was addressed in the 2019 Ontario budget as a potential downside risk to the economy. “Households are carrying elevated levels of debt, which leaves them more exposed to higher interest rates,” the budget noted. “This could lead to a decline in
“It [would take] about five more rate increases before you start seeing any generalized stress” Brett House, Scotiabank Economics was front and centre at the 2019 Exchange Traded Forum on April 2 in Toronto. A panel featuring Brett House, vice-president and deputy chief economist for Scotiabank Economics, and Brian Lewis, chief economist and assistant deputy minister for the Ontario Ministry of Finance, attempted to address the issue of household debt and what it means to
8
housing market activity and reduce consumer spending.” The Ontario budget also predicts that GDP growth rates will range from 1% to just above 2% for the next five years. That’s on pace with the national projection of 1.8%. Panellist Brett House recognizes the issue of household debt but believes it has been
overblown. “They usually look at the ratio of household debt to personal income, which is approximately the same level the US was at on the eve of the financial crisis in 2006–2007,” he says. “However, that is really only looking at part of the balance sheet.” House points to the 6:1 asset ratio in Canada, which has remained consistent for the past 30 years, as opposed to the US, where it ranges between 4.5:1 and 5:1. He also points to equity shares in real estate, which range between 70% and 75% in Canada, in contrast to the 35% they dipped to in the US during the financial crisis. “We just have fundamentally different lending standards and different household balance sheets at work,” House concludes. He also notes that headlines can be misleading. Scotiabank’s numbers show that approximately 50% of Canadians have a mort-
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DEBT SERVICE RATIO ON THE RISE 15% 14.46%
14.69%
14.10%
14.35%
Q4 2017
Q1 2018
Q2 2018
Q3 2018
14.87%
10%
5%
0%
Q4 2018
Source: Statistics Canada
gage, 32% rent and 23% own their home outright. “So when you see headlines saying that 40% of Canadian households won’t be able
Interest rates are the key factor in how household debt could impact the economy. The panel discussed how a sharp rise in rates
“With interest rates expected to rise moderately, consumption activity for interestsensitive purchases is expected to weaken” 2019 Ontario budget to pay bills if the Bank of Canada raises rates another 25 basis points, what that is saying is no one likes to pay higher interest rates.” For those renewing their mortgages, House says they’ve only noticed an increase after the last two interest rate hikes, but since they have paid down their principal, the total debt burden imposed by mortgages is not going up.
could lead to headwinds. However, the panellists noted that the Bank of Canada is aware of that, which is why it has paused on its previously aggressive rate-increase trajectory. “Given the modestly rising interest rates and elevated debt levels, growth in real consumer spending has slowed since the third quarter of 2017,” the Ontario budget noted.
“Over the projection period, with interest rates expected to rise moderately, consumption activity for interest-sensitive purchases is expected to weaken.” One of the reasons the economy has not suffered so far from household debt has been the introduction of the B-20 mortgage qualification rules, which went into effect last year. That resulted in stricter lending policy that included stress-testing mortgage holders to ensure they could weather scenarios like interest rate hikes. “We have some fat tails in distribution,” House says. “The concern is we have one fat tail that is baby boomers whose houses are paid off and millennials who have much greater debt than the average numbers imply.” However, he adds, “even when we stress test our book on younger households and mortgage holders, it takes about five more rate increases before you start seeing any generalized stress, and I don’t think anyone sees five rate increase going forward.”
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UPFRONT
INTELLIGENCE CORPORATE ACQUIRER
TARGET
PRODUCTS COMMENTS
Fiera Capital
Palmer Capital
Fiera has acquired an 80% stake in London-based Palmer Capital through Fiera Properties, its dedicated real estate investment platform
Macquarie Investment Management
Foresters Financial
Foresters is selling its First Investors mutual fund business as it turns its focus toward life insurance
Ninepoint Partners
LOGiQ Global Partners
The deal will add $3.5 billion of institutional contracts to Ninepoint’s AUM
PARTNER ONE
PARTNER TWO
COMMENTS
CDPQ
Clean, Renewable and Environmental Opportunities [CREO]
The Quebec pension fund is partnering with the global network of family offices to foster more capital into climate investments
Desjardins
Connor, Clark & Lunn Infrastructure
The two firms have obtained new hydroelectric assets through the acquisition of Regional Power from the Manufacturers Life Insurance Company
TDAM adds alternative investment solutions
TD Asset Management has announced two new alternative investment solutions for accredited investors. The TD Greystone Mortgage and Short Bond Pooled Fund Trust invests in a diversified portfolio of Canadian commercial mortgages and fixed-income investments, while the TD Emerald Private/Public Debt Pooled Fund Trust targets private and public fixed-income securities. Both funds offer access to the portfolio investment expertise of TD Greystone Asset Management, which was born from TDAM’s acquisition of Regina-based Greystone Managed Investments last year.
Ninepoint snaps up institutional advisor LOGiQ
Ninepoint Partners has acquired the assets of LOGiQ Global Partners, a global institutional advisory business, from Flow Capital Corporation. LOGiQ Global Partners is known for helping institutional investors diversify their portfolios through strategic access to differentiated global asset managers. The deal adds $3.5 billion of institutional contracts, as well as veteran sales and client service professionals, to Ninepoint’s ranks. Ninepoint also gains long-standing relationships with Canadian institutional investors, enhancing its ability to offer innovative alternative solutions to both retail and institutional clients. “While Ninepoint continues to grow organically, this acquisition accelerates our expansion into the institutional marketplace,” said John Wilson, co-CEO, managing partner and senior portfolio manager of Ninepoint Partners. “The Global Partners team sees the evolution of our industry the same way we do, and we are excited to have them join the Ninepoint platform.”
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Evolve ETFs debuts its own US cannabis ETF
Evolve ETFs has also launched a US-focused marijuana ETF on the NEO Exchange. The actively managed Evolve US Marijuana ETF (USMJ) invests in equity securities of companies with business activities in the US recreational and/or medical marijuana industry. Evolve’s investment process for USMJ will incorporate quantitative techniques, fundamental analysis and risk management, as well as a dynamic foreign-exchange strategy to hedge back to the Canadian dollar. “The cannabis opportunity in the US is similar to that of Canada a couple of years ago, but in many respects has the potential to be exponentially larger,” said Evolve president and CEO Raj Lala.
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PEOPLE Brompton converts European dividend fund
Brompton Funds has announced the conversion of its European Dividend Growth Fund into the Brompton European Dividend Growth ETF. Trading on the TSX under the ticker EDGF, the fund provides exposure to an equal-weight equity portfolio of large-cap European dividend growth companies; according to Brompton, the conversion will expand the fund’s investment universe. EDGF offers monthly distributions with the potential for capital appreciation, and it follows a selective covered-call strategy to enhance portfolio income and minimize volatility.
Horizons launches USfocused marijuana ETF
Horizons ETFs has debuted the Horizons US Marijuana Index ETF (HMUS) on the Aequitas NEO Exchange. The ETF seeks to replicate the performance of the US Marijuana Companies Index, which includes publicly listed North American life sciences companies with significant business activities in or exposure to the US marijuana or hemp industries. “As the US continues to further liberalize its marijuana regulations, we anticipate that more investors will be looking to invest in companies with significant business operations in the US market,” said Horizons president and CEO Steve Hawkins.
Assante Private Client unveils new pricing model
Assante Private Client [APC] has rolled out a new management fee schedule. Under the new scheme, management fees have been reduced by an average of 25%, and multiple tiers have been consolidated for greater simplicity. APC has also unbundled the management fee from the advisor service fee, thus providing more flexibility to advisors and their clients. The platform has also made changes to allow for more flexible and tax-efficient use of distributions in non-registered accounts. Distributions can now be used for fee payments, portfolio rebalancing or for reinvestment into clients’ portfolios, based on their personal tax situation.
NAME
LEAVING
JOINING
NEW POSITION
Erin Bury
Eighty-Eight
Willful
CEO
Matthew Hallett
TriDelta Asset Management
AlphaDelta Funds
Executive vice-president, national sales
Michael Lepore
N/A
ECN Capital
CFO
Aaron Regent
N/A
Scotiabank
Chairman of the board of directors
Lilia Sham
Intact Financial Corporation
iA Financial
Executive vice-president, corporate development
Estate planning platform announces new CEO
Willful, a Toronto-based fintech firm focused on estate planning, has appointed Erin Bury as CEO. She succeeds her husband, Kevin Ouds, who founded the company and is now head of business development. Bury previously served in several executive and advisory positions, including as managing director at creative communications agency Eighty-Eight, advisor and investor to Pressed, and board member for Save the Children Canada and Tech4SickKids. Bury said her decision to join Ouds at Willful was motivated by a desire for a new challenge, as well as plans to scale the business. “Willful has grown from an idea I had based on a personal experience into a thriving estate planning platform that has helped thousands of Canadians,” Oulds told the website Betakit. “I know [Erin is] the right person to help us achieve our mission of ensuring every Canadian adult has an estate plan in place.”
AlphaDelta Funds welcomes new EVP of sales
AlphaDelta Funds has named Matthew Hallett, a 20-year veteran of the investment industry, as its new executive vice-president of national sales. Hallett’s career includes senior positions at TriDelta Asset Management, Natixis Global Asset Management, National Bank Investments and BMO Nesbitt Burns, where he worked in various sectors, including mutual funds, alternative strategies, private equity, venture capital and banking. “Matthew Hallett is a known entity in this sector,” said AlphaDelta CEO Victor Therrien. “After working through multiple market cycles, he is already a trusted business partner to IIROC and MFDA advisors and their head offices.”
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UPFRONT
ETF UPDATE NEWS BRIEFS Are high-yield ETFs creating liquidity risk in the market?
Does the easy liquidity of ETFs belie a critical risk for those with comparatively illiquid assets? MSCI’s Reka Janosik recently examined this question by analyzing four dates of elevated highyield bond ETF redemptions in Q4 2018, each of which fell immediately after days with substantial negative price returns in the broad high-yield market. Janosik’s analysis revealed a minimal difference in bid-ask impact on both ETF and nonETF constituents, suggesting that ETF redemptions did not result in significant deterioration of liquidity. However, she added, “investors may want to pay attention to ETF redemption levels, since redemption spikes could have an impact on bond-market liquidity in highly stressed conditions.”
Horizons marijuana ETF gets lift from short sellers
The Horizons Marijuana Life Sciences Index ETF (HMMJ), one of North America’s two largest cannabis ETFs, returned more than 45% in the first quarter of 2019. A sizeable portion of that came from securities lending, which allowed HMMJ to make millions from traders betting against the red-hot cannabis market. Bloomberg data shows that cannabis securities cost some 15% to borrow, compared to typical rates closer to 1%; for popular short targets, borrow fees can reach 110%. Additionally, Canadian ETFs can lend out up to 50% of their holdings, compared to US funds, which can only lend 33%.
US regulator opens door for non-transparent ETF product
The US Securities and Exchange Commission has granted conditional approval for a new kind of ETF. Precidian
12
Investments has received preliminary support to launch an active ETF that won’t disclose its daily holdings to the public, but rather only to a subset of professional traders, thus allowing the fund to preserve some of its edge over competitors. Precidian has licensed the framework, known as ActiveShares, to other asset managers, including BlackRock and JPMorgan Chase.
Some multifactor ETFs are missing the mark
A recent analysis from Nicolas Rabener, managing director of FactorResearch, has raised questions about the underlying components of multi-factor ETFs. Looking at US-listed smart beta ETFs from 2014 to 2018, Rabener found exposure to size, value and low-volatility factors, which are line with academic and industry standards. However, he also uncovered exposures to growth, for which he noted “there is no theoretical foundation” to support positive excess return expectations. His analysis also showed a lack of exposure to momentum and quality – factors that are supported by research.
The benefits of dividend ETFs don’t stop at income
Dividend investors who focus too much on income end up missing half the story, according to Matthew J. Bartolini, head of SPDR Americas Research, who argued in a recent commentary that dividend strategies deserve to be considered for more than just income-based portfolios. Bartolini pointed to the 50% contribution dividends from S&P 500 stocks have made to the index’s annualized return over the past 30 years. He noted that dividends also have a tendency to consistently offer a positive contribution to total return each year – a definite plus when compared to price returns from equities, which can fluctuate year-over-year.
Taking ESG to the core A new suite of sustainable ETFs aims to put ESG on equal footing with more central investment objectives ESG’s star is shining brighter than ever. In a survey of investors worldwide last year, Schroders found that 64% had increased their allocations to sustainable investments over the previous five years. And a recent report from the Global Sustainable Investment Alliance showed a 42% increase in Canadian sustainable investing assets over a two-year period to reach US$2.1 trillion – a total that encompasses more than half of all professionally managed assets in Canada. Though interest in ESG has been around for years, it has widely been considered a satellite investment in portfolios. But with the launch of its new iShares Sustainable Core ETFs, BlackRock is hoping ESG will soon play a more integral role in Canadians’ portfolios. “I think Canadian investors are getting really serious about ESG,” says Pat Chiefalo, managing director and head of iShares Canada. “It’s not just about getting exposure or adding one specific product that aligns with their views. I think investors want portfolios that are not only constructed to achieve a riskreturn profile or a target outcome, but also have sustainability factors already baked in.” The iShares Sustainable Core ETFs have actually been in BlackRock’s Canadian pipeline for some time. Chiefalo says ESG engagement within the firm is incredibly high, which was abundantly clear in a January letter to CEOs written by Larry Fink, BlackRock’s chairman and CEO, in which he extolled the benefits of prioritizing ESG factors. The asset manager’s newly forged alliance with RBC, which also has a strong commitment to sustainability, opens
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up the ETF suite’s high-quality engagements to even more investors. “It provides clients an opportunity to embed ESG investing across their entire portfolio – across geographies, across sectors and across asset classes,” Chiefalo says. The sustainable core suite consists of six index-linked ETFs – four equity, two fixed income – which all follow a similar ESG approach. The initial asset universe is narrowed down by screening out names
“It provides clients an opportunity to embed ESG investing across their entire portfolio” involved in civilian firearms, tobacco and other businesses with clear ESG liabilities. A second negative screening process removes securities that are subject to severe controversies. The remaining securities are each given an ESG rating, which is calculated depending on and in alignment with the sector the security comes from. Then, to ensure that the index doesn’t completely misalign with the underlying market an investor wants to access, BlackRock applies another series of diversification, concentration and quality constraints. “We also ensure that the final portfolio has the highest ESG quality score we can achieve while ensuring consistency with the underlying benchmark,” Chiefalo says. “This suite really enables ESG to represent a foundational building block alongside other attributes like risk and return.”
Q&A
Elliot Johnson Chief investment officer and COO EVOLVE ETFS
Years in the industry 20 Fast fact Evolve ETFs’ new US Marijuana ETF (USMJ) targets companies involved in the US recreational and/or medical marijuana industry
Actively exploring US cannabis What are some of the broad tailwinds that are developing in the US cannabis space? Last year’s update of the Agricultural Improvement Act of 2018 – known as the ‘farm bill’ – to confirm the legalization of hemp, which is cannabis that contains less than 0.3% THC, is a significant softening of the US federal government’s position. There’s also the Secure and Fair Enforcement in Banking [SAFE] Act, which prevents federal banking regulators from punishing banks for working with cannabis-related businesses that follow state laws. The proposed Strengthening the Tenth Amendment Through Entrusting States [STATES] Act would essentially make cannabis federally legal in places where it is already legal at the state level. It’s not clear whether the Republican-controlled Senate will pass the bill, but President Trump said in June 2018 that he would “probably support” it. On the Democratic front, Senator Cory Booker, who’s running for the US presidency in 2020, reintroduced the Marijuana Justice Act to remove marijuana’s designation as an illegal Schedule 1 drug – a category that includes narcotics like heroin. The act was co-sponsored by other 2020 presidential aspirants like Bernie Sanders, Kamala Harris, Elizabeth Warren and Kirsten Gillibrand.
Which industries and players do you believe will get a lift from those tailwinds? Cannabis companies obviously will benefit from having more freedom to operate and eventually being able to build nationwide operations. Ancillary companies that provide logistics and financing services to the cannabis industry also stand to benefit in a more permissive environment. We expect to see more participants get involved in one form or another, whether in consumer packaged goods, banking, or retailing and distribution.
Volatility has made many investors shy away from the space. Are wild price swings a reality that cannabis investors will just have to swallow? We anticipate volatility in this sector to decrease over the long term. Companies that can grow legitimate businesses and develop products in various markets will be valued by investors based on similar fundamental metrics used to evaluate more traditional industries. In the nearer term, volatility is to be expected as legislation continues to change in various markets around the globe. We continue to believe that Canada is a leader in legalizing cannabis use and that the rest of the world will follow; exactly when that happens will depend on the workings of their respective legal systems. News on such reforms has been shown to drive investor sentiment and share prices of companies in this sector. In these circumstances, investors can benefit greatly from professional help in the form of actively managed ETFs that provide exposure to the sector while seeking to profit from, rather than suffer from, price volatility.
www.wealthprofessional.ca
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UPFRONT
ALTERNATIVE INVESTMENT UPDATE
Building a sense of crypto security Cryptocurrency platforms are under increased pressure to show that they have paramount security
solvency risk, which, in the Quadriga case, resulted in a lack of both fiat and crypto currency balances to cover clients’ accounts. In its audit of Bitbuy, CipherBlade found that all fiat-based account balance changes reflected on its back end corresponded with user changes such as deposits and withdrawals. Another test looked at total cryptocurrency asset levels across Bitbuy’s hot and cold wallets and showed that these levels
“The opportunity to establish self-regulation best practice is present now more than ever”
The high-profile bankruptcy of the Quadriga cryptocurrency exchange has left 115,000 customers locked out of $145 million worth of cryptocurrency. So far, the high-profile investigation has led to more questions than answers, but what’s clear is the need for better investor protection on crypto platforms. The CSA and IIROC have responded by launching a joint consultation on a proposed regulatory framework for crypto-asset platforms. Meanwhile, Bitbuy, one of Canada’s most renowned crypto platforms, decided to submit
NEWS BRIEFS
to an audit by CipherBlade, an independent blockchain investigation agency. “As outreach from regulators continues while the blockchain industry defines itself, the opportunity to establish self-regulation best practice is present now more than ever,” CipherBlade noted in its audit report. “Many in the blockchain industry claim to desire a minimal amount of regulation, and the only way to make this desire a reality is by blockchain companies being held to a higher standard and self-regulating.” One major risk area the audit covered was
Ninepoint Partners casts eye on US private debt
Ninepoint Partners has launched two new strategies that offer access to US private debt opportunities. The Ninepoint Trade Finance Fund, launched with New York-based Highmore Group Advisors, offers access to asset-based purchase order and supply chain financing and factoring for small and middle-market companies across the US. The Ninepoint Monroe US Private Debt Fund, advised by Chicago-based Monroe Capital, invests in a vehicle that focuses on secured debt positions with US middle-market companies.
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“matched the sum of cryptocurrencies held across Bitbuy user accounts.” Team risk was another major consideration. CipherBlade noted that many blockchain companies give team members “full keys to the castle,” increasing their threat surface through acts like indiscriminate sharing of cloud-storage credentials. Bitbuy was able to provide a tiered access list that showed which team members can access not just assets, but also social media accounts, back ends, records and other potentially impactful items. Aside from inspecting and verifying team members’ IDs, CipherBlade performed scaled background checks, with special emphasis on Bitbuy team members with access to critical infrastructure. CipherBlade found no “indicators of risk regarding team member history.”
Canada’s liquid alternative funds get new index
Scotiabank has debuted an index that tracks the equal-weighted performance of Canadian alternative mutual funds. As of March, the Scotiabank Alternative Mutual Fund Index included 22 alternative mutual funds and ETFs. By the end of that month, the index had achieved month-on-month and year-to-date returns of 0.81% and 3.13%. Over the same period, the S&P/TSX Composite Index yielded 0.64% month-on-month and 12.42% year-to-date returns, while the US S&P 500 returned 1.79% and 13.07%, respectively.
www.wealthprofessional.ca
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Q&A
Ara Sahakian Managing partner
Finding the right fit in private equity
PE GATE
Years in the industry 17 Fast fact PE Gate’s platform offers a more flexible, transparent way for investors to get involved in the private equity space
What inspired you to come up with a platform for vetted private equity investment opportunities? We wanted to provide accredited investors with the opportunity to invest in one of the leading asset classes, the PE sector, without its typical limitations. We saw a trend of investors wanting more transparency and control over investment and divestment decisions, as well as opportunities for operational involvement in target businesses. That’s exactly what we offer.
What’s your investment focus? We prefer small, niche business with high barriers to entry that have growth opportunities. We are industry agnostic, but opportunistic. We like service businesses, industrial businesses, healthcare and education; we avoid trading and other businesses that we can’t add value to. While some investors perceive an owner mulling retirement as a risk, we’re not shy to engage in such situations, as we involve ourselves, along with our professional members, in operations.
How does your process work? Our role is to secure investment opportunities for our onboarded accredited investors. We are registered as an exempt market dealer. We pursue and analyze investment opportunities, perform internal due diligence, and once a letter of intent is signed, we offer the opportunity to our members. If commitments are
Russell Investments launches yield opportunities pool
Russell Investments Canada has launched the Russell Investments Yield Opportunities Pool, which targets a yield of 4% to 6% and is designed to seek growth in a wide variety of economic and market conditions. Offering access to a select group of money managers with expertise in income-producing investments, the pool will invest in a broad range of equity, fixedincome and real-asset securities. It aims to take advantage of techniques traditionally used by large institutional investors, such as shorting and leverage.
received, we conduct a due diligence, hire external advisors and close the transaction. We then take a portfolio management role and may get involved in operations in the interim to drive growth and change to the business.
How does PE Gate differ from a typical private equity fund? We focus on small business with EBITDA under $2 million. We don’t rely on leverage for value addition, but focus on aggressive and better management. Our investor base is not ultra-high-net-worth individuals, but those with a minimum of $500,000 to invest within PE. Ticket sizes are generally a minimum of $100,000. Investors decide on what they invest in, they don’t pay a management fee, and they don’t have to make any commitments whatsoever. We also offer more liquidity by allowing investors to exit anonymously to other shareholders or other accredited investors through our platform. Aside from that, we invite professionals to partner with our platform, whether they’re operations experts who see an opportunity for a management buyout or others who have access to deals.
Can you talk about your compensation model? Similar to PE funds, our main form of compensation is performance-based carried interest, which is generally 20% on proceeds to the investor. But we don’t have a hurdle rate because there’s no management fee.
Dynamic ventures into real estate with new fund
Dynamic Funds has launched its third liquid alternative offering, the Dynamic Real Estate & Infrastructure Income II Fund. The fund seeks to provide diversification, income and long-term capital appreciation by investing in global businesses with ownership interests in real estate, utility or infrastructure assets. It also uses alternative tools to aim for improved risk-adjusted performance. The fund is managed by Tom Dicker, Frank Latshaw and Oscar Belaiche, who manage a similar strategy Dynamic launched in 2009.
Bridging Finance helps Indigenous communities
Bridging Finance has launched the Bridging Indigenous Impact Fund. Offered to accredited and institutional investors, the socially responsible private debt fund aims to assist Indigenous enterprises by providing capital and support to maintain, create and enhance thriving and sustainable economies in Indigenous communities. Lending proceeds will fund various projects that include job creation, infrastructure, housing and education. Bridging Finance has projected an annual return of 8%.
www.wealthprofessional.ca
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UPFRONT
OPINION
GOT AN OPINION THAT COUNTS? Email editor@wealthprofessional.ca
Tax-wise estate transfers The best thing advisors can do for bereaved clients is make the process of transferring assets stress-free and tax-efficient, writes Mike Connon WHEN WE lose a family member, the loss is always keenly felt. We can find some comfort by at least minimizing the wealth lost to taxes when transferring a loved one’s estate to a spouse or other heirs. I can illustrate one tax-wise strategy based on personal experience. A few years ago, my mother passed away, leaving behind a Florida investment property she and my father jointly owned. My father and I agreed it was time to sell it. He was in his 90s, and it was too much to maintain. Were it not for the burdensome capital gains taxes they expected to incur, they probably would have sold it long ago. As I was compiling information to complete my mom’s final tax return, I consulted with my parents’ accountant. He confirmed that the condo would pass tax-free to my dad. But according to the Income Tax Act, assets typically pass at their adjusted cost base to spouses and common-law partners. As such, if my dad sold the condo the following year for anywhere near its fair market value, we faced a problem: If the assets transferred at the adjusted cost base, the capital gains on the sale would not be split between husband and wife. Instead, the entire capital gain would be added to the rest of my father’s annual income, which would put him close to the top marginal tax rate. He’d owe higher taxes on the entire taxable portion of the condo proceeds, as well as the rest of his income that year. This gave me an idea to run by my own accountant. I asked him whether we could
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transfer the condo to my dad at its fair market value instead of its adjusted cost base. (An asset’s adjusted cost base is essentially its original purchase price, adjusted for certain expenses or events along the way. Fair market value is basically what it’s worth today.) My accountant said there would be some
income in the tax year of his passing and about $300,000 of unrealized capital gains in a joint account with his wife, ‘Jane.’ We held a family meeting to discuss whether it might make sense to transfer the account to Jane at fair market value rather than its adjusted cost base, similar to the strategy I’d employed for my mom and dad. Doing so would cause the family to realize Jim’s $150,000 half of the gain on his final tax return. The gains would be taxed at his minimal tax rate, and we could ‘reset’ the adjusted cost base of the account to $150,000 when it transferred to Jane at fair market value. The family agreed that this made sense and proceeded accordingly. What if we had instead transferred the account at its adjusted cost base? Upon death, Jane would have ended up with all the income in her name with no ability to split it with a spouse. As such, when Jane passes, the taxes on the additional $150,000 of capital gains would probably have ended up
“The last thing families want to be doing when they lose a loved one is to fuss over the financials. But neither do they want to give up wealth unnecessarily” extra paperwork, but it could indeed be transferred at fair market value by causing my mother’s estate to realize her spousal half of the capital gains on her final tax return. In light of her minimal income that year, these gains could then be subject to her lower marginal tax rate, creating significant tax savings for my father. If you’re following me so far, you may be wondering whether you could apply this same strategy to other assets. I wondered the same at the time, so I asked my accountant. He said yes, you could, although the Canada Revenue Agency does require you to submit a special tax election to specifically opt out of the adjusted cost base rollover. This brings me to my next illustration. About a year later, one of our elderly clients, whom I’ll call Jim, passed away. Jim had little
being calculated at a much higher tax rate, as would other income on her final return. These particular strategies may or may not work for every family during every estate transfer, but it’s worth being aware of the possibilities. They also illustrate the value a financial professional can add, especially during major life transitions. The last thing families want to be doing when they lose a loved one is to fuss over the financials. But neither do they want to give up wealth unnecessarily. That’s what we’re here for – to offer objective financial advice with our clients’ best interests in mind. Mike Connon is a senior financial planner with the McClelland Financial Group at Assante Capital Management.
www.wealthprofessional.ca
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BMO Global Asset Management comprises BMO Asset Management Inc., BMO Investments Inc., BMO Asset Management Corp. and BMO’s specialized investment management firms. BMO ETFs are managed and administered by BMO Asset Management Inc., an investment fund manager and portfolio manager and a separate legal entity from Bank of Montreal. BMO Mutual Funds refers to certain mutual funds and/or series of mutual funds offered by BMO Investments Inc., a financial services firm and separate legal entity from Bank of Montreal. Commissions, management fees and expenses may be associated with investments in mutual funds and exchange traded funds (ETFs). Trailing commissions may be associated with investments in mutual funds. Please read the fund facts or prospectus before investing. Mutual funds and ETFs are not guaranteed, their values change frequently and past performance may not be repeated. ”BMO (M-bar roundel symbol)” is a registered trademark of Bank of Montreal, used under licence.
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PEOPLE
INDUSTRY ICON
POINT OF DIFFERENCE Frank Laferriere has always had an appreciation for advisors. Now, as SVP and COO of Mandeville Private Client, he’s helping advisors differentiate themselves by finding new avenues to create wealth for their clients GROWING UP on a farm in northern Ontario, Frank Laferriere learned the importance of community, hard work, problem-solving and helping your neighbour. Those qualities have stuck with him throughout his career and continue to motivate him in his role as SVP and COO of Mandeville Private Client. Laferriere was first attracted to the financial services industry while working on his family’s farm. “Every year, when the accountant came to do the farm’s books, he had a new car and a tan; I said, ‘I’ve got to get some of that!’” he recalls. “So I deselected farming and went on to become a chartered accountant.” After earning a degree in commerce, finance, management and taxation from Laurentian University, Laferriere got his start at KPMG in Toronto. “They pretty much hired my entire graduating class,” he says. “They flew us down and showed us the bright lights of the city. It was quite the experience for a country boy. They also showed us a career path that involved multiple industries.” One of those industries was wealth management, and Laferriere instantly took to it. “I saw advisors as performing a noble function – helping people achieve their dreams but also plan for the worst,” he says. After leaving KPMG, Laferriere had the opportunity to work for Molson in a number of different countries, which left him with the
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realization of the potential Canada offered. His perspective widened while working for the Canada Revenue Agency and Office of the Superintendent of Financial Institutions. “There are lots of smart people at those agencies, and it taught me to look at things differently and keep those perspectives in
says. “He is the only advisor on the Forbes billionaire list, but he is very approachable. He taught me that to be successful, you need three things: to find a role model, ask for their recipe and do the same thing. I have worked with Michael for 20 years; he has been the most influential person I have met.”
“There is a premium investors are paying by limiting their investments to public securities … When the objective is wealth creation, wouldn’t you want to optimize your returns by taking advantage of the illiquidity discount on private securities?” mind,” he says. “There is a different motivation in the public sector, and different tools are employed. I was fortunate to get that experience.” An entrepreneur at heart, Laferriere eventually returned to wealth management. In 1998, he joined Berkshire Securities, where he first met his greatest business influence, Michael Lee-Chin, executive chairman of Mandeville’s parent company, Portland Holdings. “He is a unique individual,” Laferriere
Democratizing investments Laferriere’s passion for working with advisors fit well with the way Mandeville approaches wealth management. “If you look at the world’s most successful institutional and affluent investors like pension boards and family offices, they invest differently,” he explains. “The have created wealth by investing in a combination of public, private and alternative investments. What Mandeville is doing is democratizing
www.wealthprofessional.ca
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PROFILE Name: Frank Laferriere Title: Senior vice-president and chief operating officer Company: Mandeville Private Client Based in: Toronto Years in the industry: 32 Career highlight: Working with Michael Lee-Chin at Portland Holdings
www.wealthprofessional.ca
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PEOPLE
INDUSTRY ICON
opportunities for wealth creation by providing all wealth-seeking investors with access to private and alternative investments. They have to be quality investments and be backed by a successful track record, which Mandeville has established. We started with a clean sheet and have been able to re-engineer the way portfolios are constructed. We are able to pull the strategies used by the wealthy and apply them to the next income level.” By providing greater access for all investors, Laferriere believes Mandeville is helping advisors adapt to an evolving industry. Moving forward, he says, advisors must demonstrate their value, and access to private investments can be a big part of that. A major challenge has been resetting how the typical investor thinks about private investments, Laferriere says.
numerous tools, including a private separately managed account [SMA] program and a private asset allocation tool. Laferriere also touts the benefits of Mandeville’s digital platform – and the firm currently has an app in the works to improve its efficiency. “We realize that investors have different needs and prefer to communicate in different ways,” he says. “Some investors still like having face-to-face meetings and prefer to receive hard copies of statements, etc., while other investors, like millennials, prefer a digital experience.” Another Mandeville initiative Laferriere is proud of is the firm’s efforts to actively engage all generations of a client household in the financial planning experience. He notes that the significant personal wealth expected to be transferred from one generation to the next in Canada in the coming years will result in a
“I saw advisors as performing a noble function – helping people achieve their dreams but also plan for the worst” “With this new thinking, we have laid the foundation and built the tools for our advisors, but it is a reset on how portfolios are constructed,” he says. “There is a premium investors are paying by limiting their investments to public securities when the otherwise similar private security may be available at a 25% to 40% discount for no apparent additional risk. There’s a certain degree of liquidity investors may need, but I would challenge the fact that most investors do not need 100% liquidity, which is the commonplace practice in the industry. When the objective is wealth creation, wouldn’t you want to optimize your returns by taking advantage of the illiquidity discount on private securities?”
Tools of the trade To provide access to private investments, Mandeville has equipped its advisors with
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major shift in investor demographics in favour of women and millennials. “These are all reasons why we need to engage with the entire family of clients,” Laferriere says. “It’s just the new reality.” Having Lee-Chin at the helm of the firm has helped Mandeville implement such forward-thinking initiatives. “With Michael being an advisor himself and an owner of banks in the Caribbean, he understands the significance of these ideas when we bring them up,” Laferriere says. “More importantly, he has the capabilities to help implement them across the network.” When it comes to the industry as a whole, Laferriere’s outlook is nothing but positive. His advice is to “always place the client at the forefront, embrace and be an agent of change” – a philosophy that has served him well thus far in his career.
MANDEVILLE PRIVATE CLIENT AT A GLANCE
HEADQUARTERS Burlington, Ontario
FOUNDED 2010
PARENT COMPANY Portland Holdings
SISTER COMPANY Portland Investment Counsel
MISSION To provide all wealth-seeking investors with access to quality private and alternative investment opportunities typically reserved for institutional or affluent investors
www.wealthprofessional.ca
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An ETF for All Seasons
HAC
Horizons Seasonal Rotation ETF A rotating portfolio that seeks to anticipate seasonal opportunities. Learn more at www.HorizonsETFs.com/HAC
Horizons ETFs is a member of Mirae Asset Global Investments. Commissions, management fees, performance fees and expenses all may be associated with an investment in Horizons Seasonal Rotation ETF managed by Horizons ETFs Management (Canada) Inc. (the “ETF�). The ETF is not guaranteed, its values change frequently and past performance may not be repeated. The prospectus contains important detailed information about the ETF. Please read the prospectus before investing.
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3/05/2019 4:33:39 AM
PERFORMANCE AND BREADTH, TOGETHER.
Mackenzie’s investment boutiques deliver strong performance across different geographies and asset classes – so you have the choices you need to help your clients achieve their goals.
Commissions, trailing commissions, management fees, and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. The indicated rates of return are the historical annual compounded total returns as of March 31, 2019 including changes in unit value and reinvestment of all distributions and does not take into account sales, redemption, distribution, or optional charges or income taxes payable by any security holder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Morningstar Star Ratings reflect performance of Series F as of March 31, 2019 and are subject to change monthly. The ratings are an objective, quantitative measure of a fund’s historical
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10 Year
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3 Year
Since Inception
5.5%
5.3%
5.1%
7.0%
6.1%
8.4%
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10 Year
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3 Year
5 Year
10 Year
1 Year
3 Year
Since Inception
1 Year
3.0%
4.8%
4.4%
6.8%
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9.3%
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1.8%
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10 Year
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risk-adjusted performance relative to other funds in its category. Only funds with at least a three-year track record are considered. The overall star rating for a fund is a weighted combination calculated from a fund’s 3, 5, and 10-year returns, as available, measured against the 91-day treasury bill and peer group returns. A fund can only be rated if there are a sufficient number of funds in its peer group to allow comparison for at least three years. If a fund scores in the top 10% of its fund category, it gets 5 stars; if it falls in the next 22.5%, it receives 4 stars; a place in the middle 35% earns a fund 3 stars; those in the next 22.5% receive 2 stars; and the lowest 10% receive 1 star. For more details on the calculation of Morningstar Star Ratings, see www.morningstar.ca.
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SPECIAL REPORT
ELITE INDEPENDENTS
INDEPENDENTS Wealth Professional Canada spotlights some of the top independent wealth management practices across Canada and finds out what they’re doing to make themselves successful
AS AN INDEPENDENT advisor, you can sometimes feel like you’re on your own. With no major organization setting objectives, it can be hard to tell if you’re on the right path. That’s why WPC wanted to take a closer look at some of the best independent practices across Canada to discover how they’ve achieved success without the resources of a larger organization to fall back on. There’s no single recipe for success as an independent practice – the seven teams featured here are spread
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across seven different provinces and represent a wide range of ages, specialties, office sizes and approaches. However, one common theme that came up among all of them is the need to create a better client experience. Many advisors said technology is helping them do this, whether as a communication tool or full-on financial planning software. No matter how they address it, the teams on the following pages are thriving by putting their clients above all.
www.wealthprofessional.ca
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ZAGARI SIMPSON & ASSOCIATES
Photo: Ritlop Images
Location: Montreal Year established: 2012 Employees: 28 AUM: $220 million Target clients: Young professionals, near-retirees and retirees
Being an independent advisor has both advantages and disadvantages, but Michael Zagari and Edward Simpson of Zagari Simpson & Associates prefer to focus on the advantages, such as being able to implement the technology they want to help scale their business. Technology has become the staple behind the practice’s My Planning process, which uses
NaviPlan financial planning software to help everyone from young professionals to retirees plan their financial future. So far, the formula has led to success for the practice, which continues to expand its client base and AUM. Zagari and Simpson met a decade ago while working at Investors Group. “In 2011, I moved to Peak Financial, and Ed and I
www.wealthprofessional.ca
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SPECIAL REPORT
ELITE INDEPENDENTS
“Being an independent can be lonely because there are no preset objectives. If you don’t set them up for yourself, you don’t know how you are doing” Michael Zagari, Zagari, Simpson & Associates
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decided to open an office together about a year after,” Zagari says. “We started the practice with one other advisor and were originally managing about $25 million. At the time we didn’t really have a process, just old habits we learned at Investors Group.” As the duo evolved their practice and grew their team’s AUM to $220 million, they started implementing financial planning and established the My Planning process. At the same time, they started a radio show, the My Planning Hour, on CJAD in Montreal. Both the process and the show led to a huge explosion in their client base. “I think the show made the My Planning process relatable,” Simpson says. “Then, when we moved to fee-based, clients were really able to see that we believed in the way we were running the business and stood behind our process.” Zagari and Simpson are diligent when it comes to the clients they take in. Their first step is to see if there is a long-term fit based on the three pillars of their process: trust, chemistry and profitability. “Trust is such a big deal because clients need to trust in our recommendations without a doubt, or else the relationship won’t last,” Zagari explains. “With chemistry, we want to make sure we have clients who bring the right attitude to the table. With profitability, the relationship has to be profitable for both parties.” After they have gained sufficient information about the client, Zagari and Simpson build out a plan via the NaviPlan software that allows them to take into consideration both the client’s current situation and future goals. They then run the plan through stress tests and give the client access to it, both digitally and in print. “We educate our clients throughout the plan,” Simpson says. “We do a walk-through so they understand why we are doing something. We also revisit the plan after six
months and update it after a year. We don’t just build it and forget it.” There’s no doubt that technology has played a huge role in the way Zagari and Simpson have been able to scale their business. The practice has a scheduling program that allows clients to view schedules and make different types of appointments online. Still, they say the biggest impact has been using NaviPlan. “I think NaviPlan specifically has made it easy to dictate our value,” Simpson says. “Our clients see the impact of the decisions they make. It’s nice because there is a milestones feature that shows if clients are on track to meet their retirement goals, based on their current situation.” The biggest challenge for the pair has been bulk trading, which is difficult in their current structure. Both have a short-term goal to earn a portfolio manager designation to provide discretionary management, while incorporating more technology and continuing to grow their client base. Both men acknowledge that the services they currently offer wouldn’t be possible without independence. “Being independent allows us to select the best product based on a client’s best interest,” Simpson says. “Coming from Investors Group, it was a great place to learn the business. We realized that no competition is bad for the client. Competition leads to lower fees and better performance.” Both Zagari and Simpson landed a spot on WPC’s Top 50 Advisors list earlier this year, something they view as proof that their approach is working. “Being an independent can be lonely because there are no preset objectives,” Zagari says. “If you don’t set them up for yourself, you don’t know how you are doing. Being on the Top 50 list shows we are meeting the experience provided by the top advisors in the industry. It really helps us believe in what we’re doing.”
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WELLINGTON ALTUS PRIVATE WEALTH
Locations: Winnipeg (head office), Saskatoon (Platinum Group) Year established: 2000 (Platinum Group), 2017 (Wellington Altus) AUM: $5.8 billion (Wellington Altus), $1.2 billion (Platinum Group) Employees: 185, including 30 advisor teams (Wellington Altus) Target clients: $500,000 or more in assets In just two years, Wellington Altus Private Wealth has grown significantly, hitting $5.8 billion in assets under management. Part of that success is thanks to co-founder, vice-chairman and investment advisor Todd Degelman. Degelman, who also co-manages the Saskatoon-based Platinum Group practice within Wellington Altus, attributes the firm’s success to becoming the ‘unbank’ for advisors as the industry moves forward.
Degelman and his partner, Wellington Altus co-founder and chairman Charlie Spiring, have had their own practices in
ized they weren’t the bank types, so in April 2017, they created the second version of their independent firm: Wellington Altus. “One of the primary reasons we are having this success is we have a high level of experience,” Degelman says. “We have done it before – the management team knows how to run a successful practice. The second factor is that the 10 years going forward are going to be more disruptive. Major bank firms are creating frustration with compliance, increased costs and cutting grids, making bank firms feel more like the bank and less like the investment firm. That is leading to advisors listening to what we are doing different and better.” As a result, Wellington Altus has been able to bring many seasoned advisors to its team. Degelman now believes the firm can topple the $10 billion AUM mark before its third anniversary. Degelman and Spiring’s approach, which they now pass on to their advisors, centres around holistic planning on fee-based platforms. “We are on board with holistic planning and attracted to discretionary port-
“We are a speedboat, while the big banks are like freighters. We can be agile and update quickly, whereas it takes them longer to implement” Todd Degelman, Wellington Altus Private Wealth Saskatoon and Winnipeg for more than 25 years. In 2000, the pair combined their practices to form Wellington West Capital, starting with the two offices and $750 million in AUM. Within 10 years, they had grown to 40 offices and $10.3 billion. They sold to National Bank and entered into a five-year commitment. After the commitment ended, the pair real-
folio managers,” Degelman says. “We look for quality people with compliant books of business. We want to arm advisors with the best products and services to give clients the best experience.” He adds that Wellington Altus isn’t looking to change the way an advisor does business – just give them tools to do it more
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efficiently. One those tools is technology, which Degelman says gives Wellington Altus an advantage by allowing its advisors to be nimble. “We are a speedboat, while the big banks are like freighters,” he says. “We can be agile and update quickly, whereas it takes them longer to implement.” Technology is just one of the many benefits that Degelman sees to being independent. “The first is being completely objective and unbiased,” he says. “We don’t have any proprietary products in-house. Second is less burden of bureaucracy that is the nature in big banks. Third is the technology platform, which I think we have made competitive or bestin-class in our peer group.” While technology can be a hindrance to advisors because the access to information makes it seem like anyone has the knowledge necessary to make informed investment decisions, Wellington Altus addresses this with a client experience that aims to be three things: simple, personal and fun. “We live by those three words,” Degelman says. “We want to keep it simple and reduce the stress for clients. We also want to make it personal because every situation is different, and everyone’s goals are unique. Finally, we want to make it fun, which means we are passionate about what we do, and that comes off in conversations with our clients.” In addition to its growth as a firm, Wellington Altus’ advisors have received plenty of industry recognition. Degelman and colleague Laurie Bonten were both named to WPC’s 2019 Top 50 Advisors list. Bonten is also a finalist for Female Trailblazer of the Year at the 2019 Wealth Professional Awards, and Spiring is up for a Lifetime Achievement Award. “We find it flattering, and it is very marketable,” Degelman says of the accolades. “But it doesn’t make us stop there. We all want to be the best at all times and are always self-improving.”
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MILESTONE ASSET MANAGEMENT
Location: Calgary Year established: 1993 Employees: 5 AUM: $120 million Target clients: Independent business owners As an independent business, Milestone Asset Management, part of Canaccord Genuity Wealth Management, realized it could have an impact on other small business owners in Calgary. Now, 15 years after shifting its focus
to helping businesses with financial planning and tax solutions, the practice is finding success with its target clients. Investment advisor and branch manager Steve Booker says the shift to focus on independent business owners happened naturally. “Calgary by nature is very entrepreneurial,” he says. “I didn’t really appreciate it until I had the chance to work and travel around the world. When I returned, I really noticed it. It’s not uncommon for a few people who are working in the oil patch to pull out of that business and start an entirely new one.”
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Milestone took notice of that trend and, after surveying its clients, realized that many were business owners. The practice saw a tremendous opportunity: As an independent business, Milestone could relate to what its clients were going through. Booker says the practice spends a lot of time on the financial planning process, something many clients identified as critical. “We really have a panoramic view,” he says. “We created an S-curve formula that’s based on a business owner and their lifestyle. It focuses on the different phases of a business, from aspiration and growth through to maturity. The S-curve formula walks the entrepreneur through one or more of these business life cycles, depending on if, at the end, they sell the business and retire or reinvest into another business.” Milestone also tries to take a different approach to creating portfolios. In the beginning, like many other practices, Milestone tried to be all things to all people. The big wake-up call was when the dot-com bubble burst, and Milestone saw the need to be more consistent with portfolio management. “We scoured the globe to see who was doing it the best and arrived at the Yale Endowment Fund,” Booker explains. “It is really one of the best in the world, but no one talks about it. They are leaders in private investments and asset classes that other managers just don’t use. We took their model, unpacked it and Canadian-ized it to make it retail-friendly. There are eight wedges in the pie that can be customized based on risk tolerance. The products remain largely the same, but the weighting differs.” One of the big challenges for Milestone is managing businesses’ tax structures so clients maximize their earnings. This was something its advisors began working on well before the 2017 federal budget instituted new regulations were on passive income on retained earnings for business owners.
“Two years prior, we designed specific portfolios that minimized tax leakage,” Booker says. “It’s like a standard risk-return graph, but it incorporates tax leakage that affects the long-term performance. Passive income tax can be as high as 50.67%, so we try to help owners avoid that and transition to something that pays dividends or capital gains. We really work to educate business owners to rethink how they invest their money.” By remaining an independent practice, affiliated with Canaccord Genuity Wealth Management, Booker says Milestone has been able to address those challenges. “The two large benefits of being independent are running our business how we want and being able to choose the products we use,” he says. “Canaccord Genuity Wealth Management has been great to work with because they are supportive of our value proposition – they don’t tell us what kind of business to run. It is great on the product side, too, because we are under no obligation to use any specific product, so the relationship has worked out really well. Our clients like that we are not associated with a bank and are not under pressure to cross-sell them products.” In addition to their day-to-day business, the Milestone team is very hands-on in giving back to the community. Four years ago, they began working with a local high school on a film festival fundraiser. “We approached the school and the historic Globe Cinema to create a gala,” Booker says. “We charge admission, have a silent auction, all of the students’ movies get shown on the big screen, and 100% of proceeds go back to the school. It has been a really fun way to give back.” Between its service to business owners and its fundraising initiates, there’s no doubt that Milestone has had an impact on the Calgary community. The practice recently celebrated its 25th anniversary, and judging by its current path, it should be helping the community for years to come.
“The two large benefits of being independent are running our business how we want and being able to choose the products we use” Steve Booker, Milestone Asset Management
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SPRING FINANCIAL PLANNING
Location: Vancouver Year established: 2017 Employees: 11 Target clients: Advice-only; cash-flow team serves higher income, pre-retirees, middle income and complex financial situations When Julia Chung left traditional financial services, someone told her, “Planning only? No one will pay for that!” Chung’s response was that if she made fantastic plans, people would. Now, after eight years as CEO and senior financial planner at Spring Financial Planning, Chung has been able to find success serving clients across Canada. The advice-only industry is still pretty small; Chung met her business partner, Sandi Martin, through a LinkedIn group. “We each had our own independent advice-only firms,” Chung says. “I started mine in 2011, and Sandi started hers in 2012. We used the LinkedIn group to share best practices. We realized that we had a lot in common, so I suggested we consider a partnership. We each had different specializations and realized we were a fit. We started working side-by-side and in 2017
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decided to amalgamate.” Chung and Martin then added two more advisors, Kathryn Mandelcorn and Karen Richardson, who form the cash-flow team. “I think the key to our success has been that we have a real vision and make sure to get the message out,” Chung says. “Krysten Merriman, our marketing director, has really done a good job of pulling out what we repre-
because of the emphasis it puts on a client’s value system and goals to produce financial plans. Spring’s advisors realize every situation is unique and vary their plans according to an individual’s needs. “The first thing we do is have a discovery meeting to figure out what people hope to achieve,” Chung says. “We really try to dig deep into our clients’ values and fears. We
“We really try to dig deep into our clients’ values and fears. We don’t just have them fill out a form; we want to know as much about them as possible” Julia Chung, Spring Financial Planning sent. She uses the tools we have to effectively communicate that. The other key has been that we are mindful of the service we offer. We don’t execute; we just plan. Clients still need an advisor or other professionals to do that. So we try to bring all professionals together: advisors, accountants, lawyers, etc.” Chung believes her practice is different
don’t just have them fill out a form – we want to know as much about them as possible. Then we provide a written proposal where we ask for more info. Then we provide a foundation report and go through it with them. We get to a deeper level to find out what they want out of life and their finances. Then we create the plan that solves problems.”
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While Spring has been able to thrive as an advice-only practice, Chung admits there were challenges. “Early on, it was getting people to understand what we do and recognize our business model,” she says. “By charging for hours, we really need to manage our capacity well. That’s one of my challenges as the head of the practice. I make sure we are using all of our tools and that we’re offering quality plans by taking advantage of the systems and processes we have.” Being advice-only has allowed Spring to focus on planning, which Chung sees as a big advantage. “Traditional financial planning has usually been done while the planner is doing at least one other thing – portfolio management, etc. But financial planning itself is a lot of hard work. It’s hard to do any one thing well when you’re doing multiple things.” Spring’s business model is largely based on technology. Because all employees work remotely, Chung says great communication tools are paramount. “We use an internal messenger, a powerful CRM and have encrypted spaces where clients can upload their information and we can manage the data transfer, so we are really heavy users of technology,” she says. Many of the practice’s clients are techsavvy as well, using the plans created by Spring to manage their own wealth. “Many of our clients are do-it-yourselfers,” Chung says. “We don’t provide investment advice – we may say that to accomplish your goal, you need to achieve a return of X, but we won’t provide specifics. If they need that information, we refer them to an advisor.” With a commitment to working with an individual and their network of professionals, Spring has been able to establish itself with a distinct business model and hopes to continue growing. “We work with all of their professionals to become the ‘board’ for the client,” Chung says. “By treating them like a partner, there is less stress on the individual.”
NORTHLAND WEALTH MANAGEMENT “We put the families we serve first and foremost. We believe if we do that on an investment and service basis, it will come back to us over time” Arthur Salzer, Northland Wealth Management Locations: Markham, Calgary and Miami (opening late 2019) Year established: 2011 Employees: 14 Target clients: $5 million to $100 million in assets; the firm currently looks after 100 high- and ultrahigh-net-worth families across Canada, Europe, the Caribbean and the United States In 2011, Arthur Salzer and business partner Paul Mascard formed Northland Wealth Management. The firm’s origins, however, trace back to the early 2000s, when the duo was working at another firm and helping a client’s family take their company public on the Toronto Stock Exchange. Salzer and Mascard quickly realized that the money earned from the listing acted as an amplifier not only for the family’s assets, but also their behaviour. That was when they decided their approach needed to include managing human capital, not just financial.
“That was what caused us to start Northland Wealth – to have an unconstrained, fully independent firm concentrated on financial and human capital,” Salzer says. “The services we provide include institutional access to investments, both traditional and alternative.” Northland is a big believer in the new 60/40 split in asset allocation. “Traditionally that meant 60% equity and 40% fixed income,” Salzer explains. “Now we look at 60% public market, 40% private and alternative. On the public side, we haven’t seen managers create material alpha after fees and taxes. So we tend to have low-cost beta approach to accessing the public markets. On the alternatives side, we look at private equity, real estate, debt and hedge funds.” Offering that access to alternative investments has been a focus at Northland since day one. “Ultra-high-net-worth individuals have created their money by owning and operating private businesses or private real estate,” Salzer says. “To be able to offer that on an
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institutional basis was a differentiator for us.” Salzer does admit that gaining traction with this approach has been a bit of a challenge. “There tends to be a broad understanding and acceptance of what a multi-family office does in the US, but I think we are at the early stages in Canada,” he says. “When you look at the banks and the major firms, they control 70% to 80% of all wealth in Canada. Too many investors think an IIROC dealer, who is a commissioned salesperson, somehow has their best interest at heart. Investors think they can get them access to whatever they need, and we have found that is not the case. Educating them what is available outside the major banks has been our biggest hurdle but also our biggest advantage.” Dealing with private investments also comes with the challenge of regulation. “I think understanding the risk is the big thing,” Salzer says. “Before we make an investment, we will look at an asset class to decide if we want exposure to it. We then look to see who the best investors or asset managers are in that space. Northland then reaches out, and we have conversations with the company. It is a four- to six-month due diligence process that involves documentation and sub-agreements. Then we look at customizing fees to increase the performance for our clients. Once the investment is made, we follow up with calls, going to AGMs and meeting with managers and investors who utilize the investments.” Being fully independent allows Northland to rely on its own investment philosophy. “We put the families we serve first and foremost,” Salzer says. “We believe if we do that on an investment and service basis, it will come back to us over time, and that has occurred.” Now, Northland is focused on expanding to the US – it plans to add a Miami office later this year. “That way, we can increase the number of families we serve across the United States,” Salzer says, “and we will have full cross-border services between Canada and the US.”
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CIC FINANCIAL GROUP Location: Ancaster, ON Year established: 1990 Employees: 5 AUM: $204 million Target clients: Approaching or in retirement In the current landscape, a holistic approach to financial planning has become the norm. Yet CIC Financial Group has been doing business this way since its inception in the early 1990s. Brad Jardine, who started the practice and currently serves as president and senior financial advisor, says CIC’s model is the foundation for the success it continues to see.
feel it out to see what the comfort level is. We tell them the list of things we need them to bring to our first meeting. They need to do the work, too, if we are going to work together. These are things like tax, insurance and investment information, along with upcoming major expenses. We require everything in a budget to invest.” From there, Jardine can paint a picture of an individual’s income. The practice generates in-depth reports and a sample tax return to give clients an idea of what their situation looks like and answer that recurring question: “Am I going to be OK?” “We give them the bottom line of what their income will look like after taxes and
“I really think it goes back to that holistic approach. I never thought it was anything innovative – it just made sense to consolidate all of the services” Brad Jardine, CIC Financial Group “I really think it goes back to that holistic approach,” Jardine says. “I never thought it was anything innovative – it just made sense to consolidate all of the services. Looking back, it really did help us establish ourselves in the area because not many others were doing it the same way.” CIC is entirely referral-based, and Jardine says that once word got out about its approach, the business took off. “We have always been holistic and will continue to be,” he says. “When someone is referred to us, we
show how we can maximize it,” Jardine says. “We fix it so they are not paying more – we do the homework for them.” For Jardine, ensuring a good fit is critical. He says that because CIC is referral-only, the practice has the luxury of not having to take on a client if they aren’t the right match. “We want to make sure we have the resources to look after our existing clients as well as new ones,” he says. “We have to make sure we plan to have the time to work with everyone.” While the holistic focus of the practice
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hasn’t changed over the years, CIC has made efforts to lower clients’ fees and keep them as transparent as possible. The practice also takes care of clients’ tax filing as part of its standard service. Jardine is an IIROC-registered investment advisor with Aligned Capital Partners, and he says working with them has made his commitment to finding the right fit easier. “Aligned is one of the few IIROC dealers with a defined advisor cost model, whereby we are able to dedicate more resources to support our client base,” he says. Jardine enjoys the independent environ-
ment he and his team operate in because it allows them to make the best choices for their clients. “There is no pressure to use a certain product,” he says. “We have a large product shelf to use, and we are left alone to run our business. Being an independent, we are really treated with respect.” Having been in the industry since 1986, Jardine is now faced with another challenge: succession planning. Even with his and the practice’s success, he realizes he needs to create a plan to give his clients peace of mind. “My son works with me now, demonstrating attention has been paid to succession
planning, and clients are at ease, knowing that there is a plan in place,” he says. “If there was anything else, I would like to hire another advisor in between the ages of myself and my son to help in the transition.” Given his focus on the future, there’s no doubt that the process that made Jardine successful all those years ago will continue even when he does decide to retire. Brad Jardine provides securities and mutual funds through Aligned Capital Partners Inc. (ACPI), a member of the Investment Industry Regulatory Organization of Canada (www.iiroc.ca) and the Canadian Investor Protection Fund (www.cipf.ca). Any advice which may be given in respect of non-securities services, including insurance and taxation, is given by CIC Financial solely and no such advice is given in their capacity as an agent of ACPI.
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WHITE LEBLANC WEALTH PLANNERS
Locations: Dartmouth, NS (head office); Truro, NS; Nelson, BC; Powell River, BC; Burlington, ON Year established: 2013 Employees: 15 (plus four partners) AUM: $430 million
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Colin White and Dan LeBlanc each had their own practice for more than 20 years before they joined forces in 2013 to form White LeBlanc Wealth Planners, part of HollisWealth, a division of Industrial Alliance Securities. Since then, their practice has continued to evolve through mergers
both in their home province of Nova Scotia and in British Columbia and Ontario. Still, at the heart of their operations is a strong belief in their process and the people they’ve surrounded themselves with. “The business has been a constant evolution,” White says. “After we merged in 2013,
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Dan and I earned our portfolio manager designations.” That’s when the business started to expand. In 2014, White and LeBlanc met with two advisors in Truro, Nova Scotia, looking for a succession plan. After their conversations, the duo decided to take over the practice and make it their second office. Then two offices in British Columbia called with similar situations. Finally, in 2018, the pair received a call from an office in Burlington, leading to their fifth location. “We thought that our process-driven platform was something we could offer to a new set of clients,” White says. “As we evolved, we kept building our platform and expanding our offering and adding quality people. We never really set out looking to open offices all across the country – all of them were succession plans. We started by supporting the advisor with our platform and team. Then, when they knew their clients were in good hands, they had the ability to retire.” White describes the practice’s platform and approach to wealth management as very client-centric. “All of what we do is dependent on what the client is looking for,” he says. “We don’t have one cookie-cutter solution. We put a big importance on capital preservation and purchasing power protection, which is tough in today’s market. We have three portfolio managers on the discretionary side, which helps in building out the portfolios. Clients tell us what they need, and we can make it work in almost any type of account.” Having portfolio managers on staff is something White sees as his practice’s biggest advantage. “I think what we offer on the discretionary side is unique,” he says. “Our portfolio managers and other investment team members have worked at major firms and have brought that experience to us now.” In addition to the portfolio managers, White says that as the business has evolved,
so have all members of its staff. White himself broadened his experience by serving in volunteer roles on the Nova Scotia and national IIROC advisory boards, which he says gave him a different perspective and helped the practice transition to a discretionary model. “We have added depth at every level over the years,” he says. “Our staff has evolved, and many have taken additional courses to have more areas of expertise. It allows us to answer more questions and help in more complex areas.” Having that expertise helps in dealing with client expectations, something White sees as one of the biggest challenges advisors face today. “We live in a 24-hour news world, and people read or hear things that can be scary and then get worried about their finances,” he says. “Managing that, reassuring them that we are on top of things, is a big challenge.” White attributes the success of the practice to its people, who helped contribute to White LeBlanc Wealth Planners being named as a finalist for Top Advisor Office (10 Staff or Fewer) at the 2018 Wealth Professional Awards. “It is a huge endorsement of our people,” he says. “I am proud of our team and believe they are the best in the industry. It shows how we put the client first, how hard the team works and how much they care.” While the practice has spent the last few years expanding, White says the focus now is simply on improving what they’re doing each day and creating a better client experience to attract the best people. “When you work with good people,” he says, “it’s a lot of fun.”
“All of what we do is dependent on what the client is looking for. We don’t have one cookie-cutter solution ... Clients tell us what they need, and we can make it work in almost any type of account” Colin White, White LeBlanc Wealth Planners
This information has been prepared by Colin White, who is a Portfolio Manager for HollisWealth®. Opinions expressed in this article are those of the Portfolio Manager only and do not necessarily reflect those of HollisWealth. 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.
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SPECIAL PROMOTIONAL FEATURE
SMART BETA
Focusing on factors BMO Global Asset Management looks at the entire stock universe to provide smart beta strategies that fit the needs of investors
SMART BETA, or factor-based investing, has gained popularity since the 2008 financial crisis. As some investors have moved away from traditional benchmarks, due in part to varying investment objectives such as lower risk tolerance, this has led to the rise of factor-based investing. BMO Global Asset Management has responded by offering multiple solutions targeted to different factor and geographic exposures. “Smart beta is anything that is defined as
factor that an income-oriented investor may be looking for, so there are certain factors you can tilt towards that satisfy those types of investors,” he says. “Essentially, smart beta or factor-based investing is tilted towards an inherent factor that an investor is seeking out.” As factor-based investing has grown in popularity, Lee has noticed a couple of factors that have appealed to investors. Low volatility addresses the lower risk tolerance many investors have had since the 2008 crisis.
“For smart beta, we want to provide a pure exposure to the factor while best removing the unintended biases” Alfred Lee, BMO Global Asset Management non-market-cap-related,” says Alfred Lee, director and portfolio manager of exchangetraded funds at BMO GAM. “Traditionally, when you look at ETFs, the weighting methodology behind them is essentially that a larger company, or larger market cap, has a larger precedent in the index. Sometimes that makes sense, but for certain investors, it might not be a perfect fit.” Lee says investors are often looking for other factors or criteria. “Dividends are one
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While they still want equity exposure, they want it with less risk. “When you look at a traditional index, it may be riskier than what certain investors want,” Lee explains. “Since 2008, a lot of investors remember what it was like, so very often, they want equity exposure but not the downside of your traditional market-capweighted index. For those investors, they may tilt towards a low-volatility index in order to maintain that equity exposure but
manage the downside risk as well.” Dividend is another factor that has seen a rise in popularity, due to the aging population. “As more people retire or near retirement,” Lee says, “your traditional benchmark may not have enough dividends for them, and they may look to use a dividend-weighted index to get them in their portfolio.” While low volatility and dividend are the factors currently garnering the most attention from investors, MSCI has identified six factors for investing, including quality, value, momentum and size. In addition to low volatility and dividend, BMO has focused on quality and value; its commodity-based ETFs also provide some exposure to size. Lee notes that because most of BMO’s investors tend to be buy-and-hold investors, the firm hasn’t explored momentum as much because it tends to be a tactical play.
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CAPTURING UPSIDE AND LIMITING DOWNSIDE Upside/downside capture ratios show how an investment has performed relative to the broad market during rising and falling markets. BMO’s low-volatility ETFs have captured the majority of market ups and effectively limited the downs since their inceptions.
“Momentum definitely has a place in the portfolio,” he says, “but what we want to do is have those cornerstone buy-and-hold strategies that we prefer to replicate.” In Canada, BMO has been noticing more interest in the low-volatility factor because the market tends to be concentrated and volatile. Meanwhile, Lee notes that investors looking at the US and Europe tend to focus more on the quality factor. When it comes to factor-based ETFs, Lee suggests that investors and advisors “look under the hood” to really understand how a factor-based investment is constructed. “How you define certain factors is different from one provider to another,” he says. “Low volatility is a good example. When you look at some ETF or index providers, some essentially take a market-cap-weighted index and keep the same sector weightings, but pick the
BMO Low Volatility Canadian Equity ETF (ZLB) Inception: October 21, 2011 Upside capture: 72.7% Downside capture: 45.6% BMO Low Volatility US Equity ETF (ZLU) Inception: March 19, 2013 Upside capture: 77.7% Downside capture: 67.1% BMO Low Volatility International Equity ETF (ZLI) Inception: September 2, 2015 Upside capture: 72.3% Downside capture: 58.1% Source: Morningstar data as of March 29, 2019, based on daily returns; ZLB is compared to the S&P/TSX Composite Index TR
lower-volatility stocks within those sectors and reduce volatility that way. We don’t view these as pure factor exposures, as when you apply it to a market such as Canada, it would still have a high allocation towards volatile sectors such as energy and materials. Our methodology looks at all the stocks in the universe that have the lowest beta, while
applying a cap on sectors and individual names as a risk control. “When building products, we always listen to our client’s objectives and figure out the most efficient way of delivering that exposure,” he adds. “For smart beta, we want to provide a pure exposure to the factor while best removing the unintended biases.”
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SPECIAL PROMOTIONAL FEATURE
SMART BETA
BMO’S FACTOR-BASED ETF LINEUP Low volatility BMO Low Volatility Canadian Equity ETF (ZLB) BMO Low Volatility US Equity ETF (ZLU, ZLU.U, ZLH) BMO Low Volatility International Equity ETF (ZLI, ZLD) BMO Low Volatility Emerging Markets Equity ETF (ZLE) Dividend BMO Canadian Dividend ETF (ZDV) BMO US Dividend ETF (ZDY, ZDY.U, ZUD) BMO International Dividend ETF (ZDI, ZDH) Quality BMO MSCI USA High Quality Index ETF (ZUQ) BMO MSCI Europe High Quality Hedged to CAD Index ETF (ZEQ) BMO MSCI All Country World High Quality Index ETF (ZGQ) Value BMO MSCI Canada Value ETF (ZVC) BMO MSCI USA Value Index ETF (ZVU) BMO MSCI EAFE Value Index ETF (ZVI) Source: BMO ETFs
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That logic applies all of BMO’s factorbased offerings. “When you are looking at our dividend ETFs, what we are doing is looking at dividend payers that have grown dividends,” Lee says. “The danger is that if you are focusing on companies that have higher dividends, you may be getting into a yield trap: a company paying a high dividend because the share is plummeting. We do a secondary screening and look for companies that have sustainable cash flows in order to maintain those dividends.” While low-volatility and dividend have
currency hedged or not.” The ability to pinpoint what investors want is what Lee sees as the primary benefit of factor-based investing. He says traditional benchmarks aren’t a ‘one size fits all’ strategy. “Factor-based investing and smart beta allow for investors to really target part of the market or be more accurate in terms of meeting their end objectives when it comes to investing,” he says. Ultimately, Lee believes advisors should be looking at factor-based options because each investor is unique. “Different clients will have
“Generally, what we like to do is offer the factor exposure but allow the investors to choose which region they want to apply it to” Alfred Lee, BMO Global Asset Management been the factors investors have gravitated towards, Lee believes quality is well positioned to be the next big factor. “Quality companies are essentially bluechip companies that have stable earnings, high return on equity and low financial leverage,” Lee says, adding that blue-chip companies could make solid long-term holdings in a portfolio, as they have sustainable competitive advantages – what Warren Buffett calls “economic moats.” In addition to targeting various factors, BMO also aims to offer regional exposure. The firm’s low-volatility ETFs offer exposure to Canada, the US, international and emerging markets; dividend ETFs have Canada, US and international exposure; quality ETFs have global, US and Europe exposure; and value ETFs have Canada, US and Europe exposure. “Generally, what we like to do is offer the factor exposure but allow the investors to choose which region they want to apply it to,” Lee says. “Being Canadian investors, currency hedging is important, and we like to have options for the end investor if they want that
different needs,” he says. “Certain investors will have more need for income; some may have a lower tolerance to risk. With smart beta and factor-based investing, it allows the advisor to implement a more suitable portfolio for the end investor.” The information contained herein is not, and should not be construed as, investment, tax or legal advice to any party. Investments should be evaluated relative to the individual’s investment objectives and professional advice should be obtained with respect to any circumstance. Any statement that necessarily depends on future events may be a forwardlooking statement. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. Although such statements are based on assumptions that are believed to be reasonable, there can be no assurance that actual results will not differ materially from expectations. Investors are cautioned not to rely unduly on any forward-looking statements. In connection with any forward-looking statements, investors should carefully consider the areas of risk described in the most recent simplified prospectus. Commissions, management fees and expenses (if applicable) all may be associated with investments in exchange traded funds. Please read the ETF Facts or prospectus before investing. Exchange traded funds are not guaranteed, their values change frequently and past performance may not be repeated. For a summary of the risks of an investment in the BMO ETFs, please see the specific risks set out in the prospectus. BMO ETFs and ETF series trade like stocks, fluctuate in market value and may trade at a discount to their net asset value, which may increase the risk of loss. Distributions are not guaranteed and are subject to change and/or elimination. BMO ETFs are managed by BMO Asset Management Inc., which is an investment fund manager and a portfolio manager, and a separate legal entity from Bank of Montreal. ®/™Registered trademarks/trademark of Bank of Montreal, used under license.
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SPONSORED PROMOTIONAL FEATURE
EXPERT ADVICE
Fixed-income exposure through ETFs Horizons ETFs explains why ETFs are an efficient and diverse way to include fixed income in portfolios as the sector stabilizes AFTER WITNESSING market volatility in the fourth quarter of 2018, many investors turned to fixed income to find peace of mind. As central banks paused their interest rate hikes, the markets were able to stabilize. Moving forward, fixed income remains an important component of investors’ portfolios. One thing fund manager Horizons ETFs has noticed is that investors are increasingly turning to ETFs to gain exposure to fixed-
Marie Rocca, vice-president and senior portfolio manager in fixed income at Fiera Capital, which subadvises some of Horizons’ fixedincome ETFs. “Tariffs created a lot of uncertainty, and in the fourth quarter of 2018, that uncertainty caused central banks to pause increases,” Rocca says. “Domestically, rate increases also paused, as there was a fear of a recession. I still think it is too early to say that, but the pause made for a
“There is a nice balance right now for fixed income. Growth is slowing, but I hope that by stopping rate increases, it will help with stability” Jane-Marie Rocca, Fiera Capital income instruments. By offering efficient exposure to a diversified set of fixed-income products, ETFs could be the way many investors incorporate fixed income in their portfolios moving forward.
Fixed income globally and domestically The hiatus in rate increases was predicated by a slowdown in global growth, says Jane-
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more positive tone in the first quarter of 2019.” In addition to allowing the market to regroup, Rocca says, the lack of rate hikes also helped the liquidity of fixed-income products. “Interest rates were coming off lows – in Canada, the 10-year treasury bond yield is 1.75%, but it was as low as 1.53%,” she says. “Markets tend to go one way or another, but now they are stabilizing; even the riskier assets
began to stabilize in the first quarter of 2019.” Rocca believes rates aren’t likely to go up again in the immediate future. She says the central banks are looking to stimulate growth and aren’t as worried about inflation rising. “We probably won’t see rates go lower or hit the lows they were at,” she says. “Canada does have issues in household debt, and keeping rates low allows Canadians to handle that debt, knowing that their mortgages aren’t going to increase significantly. With rates remaining the same, it could get growth going again and allow provincial and corporate spreads to do well and add to their positions.” If the current environment persists, Rocca notes that it will allow the capital in fixedincome investments to remain and the income to continue. “There is a nice balance right now for fixed income,” she says. “Growth is slowing, but I hope that by stopping rate increases, it will help with stability.” Now, Rocca sees plenty of opportunities in fixed income, especially for active managers. “Active managers can take advantage of trends in terms of duration in the portfolio or in corporate credit by adding to their exposure,” she says. “Fixed income has always been a vital part of investors’ portfolios and can potentially add positive performance now, as long as rates stay at this level. There is a potential advantage to having it in portfolios. Going into 2019, investors were scared by the volatility in the markets and moved money into fixed income for peace of mind.”
Fixed income and ETFs Increasingly, opportunities for investing in fixed income are arriving in the form of ETFs, which are seeing more inflows and greater investor demand. “The vast majority of fixed-income ETF flows in 2019 are going into the sector of fixed income known as the Canadian aggregate bond fixed income category, which comprises broad investment strategies that own both high-investmentgrade government and corporate bonds,” says Mark Noble, senior vice-president of ETF strategy at Horizons ETFs.
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One example is the Horizons Active Canadian Bond ETF (HAD), an actively managed strategy that seeks long-term returns primarily through maximized interest income and moderate capital appreciation. HAD invests primarily in a portfolio of high-quality Canadian fixed-income securities denominated in Canadian dollars, including government and
“The management team of HAD has tightened the duration to about a year less than the broad benchmark,” Noble says. “In the latter half of 2018, it had tactically gone longer duration, which turned out to be a good call, and now the team is positioning for a potential pullback on the longer end of the curve.” When looking at fixed-income ETFs, Noble
“In general, an ETF is going to be a much more liquid and a lower-cost option with which to transact bonds ... Advisors can efficiently match their fixed-income needs with ETFs” Mark Noble, Horizons ETFs corporate bonds. Subadvised by Fiera Capital, HAD was honoured with the 2018 Lipper Award in the Canadian fixed income category.* While interest rate risk isn’t the same as it was a year ago, HAD’s ability to shorten or lengthen duration has given it the opportunity to potentially outperform index-tracking ETFs.
says one of the main benefits is that they apply equity characteristics to bonds. This results in ETFs’ prices being more transparent, and the trading spread can end up being less than with individual bonds. “We often refer to bond ETFs proving a ‘lit’ market for bonds,” Noble says, “since
they provide pricing transparency and an important source of liquidity for investors looking to get bond exposure.” For advisors, using ETFs to provide clients with fixed-income exposure offers the advantages of cost efficiency and flexibility. “In general, an ETF is going to be a much more liquid and a lower-cost option with which to transact bonds,” Noble says. “Additionally, and potentially more importantly, advisors can efficiently match their fixed-income needs with ETFs. If they want less interest rate risk, they can buy a shorter-duration bond ETF; if they want a higher yield, they can buy a highyield strategy. They can also tactically allocate in and out of bond strategies based on their own outlook. This flexibility really allows advisors to tailor their client’s fixed-income exposure to their unique income needs.” Much like Rocca, Noble believes the current trends in fixed income will continue moving forward. “For this year, almost half the inflows have gone into fixed income,” he says. “I expect this trend will likely continue until there is more confidence amongst retail investors in the global equity markets. Because it remains a huge source of asset flows, I would expect there will continue to be a deluge of fixed-income and income-focused products coming to market.” *Horizons Active Cdn Bond ETF (HAD) was awarded the 2018 Lipper Fund Award in the Canadian Fixed Income category, for the three and five-year periods ending July 31, 2018, out of a total of 12 ETFs and 10 ETFs respectively, and the Horizons Active Floating Rate Bond ETF (HFR) was awarded the 2018 Lipper Fund Award in the Canadian ShortTerm Fixed Income category for the three-year period ending July 31, 2018 out of a total of 21 ETFs. The Thomson Reuters Lipper Fund Awards, granted annually, highlight funds that have excelled in delivering consistently strong risk-adjusted performance relative to their peers. The Lipper Fund Awards are based on the Lipper Ratings for Consistent Return, which is a risk-adjusted performance measure calculated over 36-, 60- and 120-month periods. The highest 20% of funds in each category are named Lipper Leaders for Consistent Return and receive a score of 5, the next 20% receive a score of 4, the middle 20% are scored 3, the next 20% are scored 2 and the lowest 20% are scored 1. The highest Lipper Leader for Consistent Return in each category wins the Lipper Fund Award. Lipper Leader ratings change monthly. For more information, see lipperfundawards.com. Although Thomson Reuters Lipper makes reasonable efforts to ensure the accuracy and reliability of the data contained herein, the accuracy is not guaranteed by Lipper. Performance for the HAD fund for the period ended July 31, 2018, is as follows: 3.64% (1 year), 1.40% (3 year), 3.17% (5 year), and 2.46% (since inception on October 10, 2012). Performance for the HFR fund for the period ended July 31, 2018, is as follows: 1.76% (1 year), 1.88% (3 year), 1.84% (5 year), and 2.28% (since inception on December 10, 2010). The corresponding Lipper Leader total return ratings for HAD for the same periods are as follows: 4 (3 years), 4 (5 years). The corresponding Lipper Leader Ratings for HFR for the same period are as follows: 5 (3 years), 5 (5 years).
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PEOPLE
ADVISOR PROFILE
Bridging health and happiness Nader Hamid tells WPC how he and his team are helping clients make good decisions about their financial futures
IN MORE THAN 17 years in wealth management, Nader Hamid has done and learned a lot. He has watched the industry transform, stayed on top of trends, incorporated technology and continued his own personal education. Now, he uses that experience to help his clients make good decisions about their finances by focusing on educating them, whether during meetings and seminars or through newsletters and blogs. A portfolio manager and director at Total Wealth Management Group [TWM], part of HollisWealth, a division of Industrial Alliance Securities, Hamid has always had a passion for investing, purchasing his first stock at the age of 15. He began his career as an investment advisor in 2002 but felt limited in the role. He went on to earn his CIM certification and become a portfolio manager. “To truly help people, you need to be able to guide and direct all aspects of their financial lives – that’s not just managing their investments,” Hamid says. “Being a portfolio manager lets me implement advanced investing strategies.” Hamid founded TWM in 2005; since then, he has developed a niche clientele of highnet-worth individuals looking for complete service solutions and portfolio management. While he has found success, he hasn’t been
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able to do it alone. Hamid points to the strong team around him, who help him provide a high level of service to his clients. “Everyone uses their unique abilities to maximize their potential and provide excellent service,” he says. “I have a phenomenal partnership with portfolio managers Jean Henault, who has been a mentor to me, and Pascal Ricard, who is an associate.” Hamid, Henault and Ricard are all keen followers of well-known investor Ray Dalio’s principles, which helps them brainstorm and generate new ideas to improve client service. Hamid also recognizes administrative services manager Vanita Batra, whom he calls “the backbone” of the practice, as well as Lily Yan and Tessa Wong for their admin-
istrative expertise, and Chelsea Parasuco and Olivier Jean, who specialize in research and portfolio management. Over the years, Hamid has watched his team grow within their own unique abilities. “It really allows me to focus on my passions and strengths, which are portfolio management, financial planning and client relationships,” he says. “Being well surrounded by people who are specialists in other areas has been one of the reasons for our success.” Hamid says his practice has remained agile and ahead of the curve, even with the major transformations that have happened in the industry since the business was established. “We have implemented and learned new technologies and adopted an evolving
THE TWM APPROACH Hamid says the cornerstone of his firm’s wealth management strategy is continuously improving all processes: portfolio management, the team, and client relationships and touchpoints. It’s a challenge he meets head-on daily. “Our success is that we really help our clients reach their objectives with peace of mind and help them through transitions and difficult periods,” he says. Hamid uses a pension-like approach to investment, relying on discretionary access to things like private equity, customized products, private debt and real estate to diversify his clients’ portfolios. “We think it’s important to diversify away from traditional plain-vanilla balanced funds,” he says. “It’s much harder to make and generate yield than it was 20 years ago.”
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“To truly help people, you need to be able to guide and direct all aspects of their financial lives – that’s not just managing their investments” management approach as well,” he says. “The huge amount of investment choices and information available has added a lot of complexity to the space. Our portfolios are now built by three portfolio managers, including myself, and several CFA analysts – that wasn’t the case 10 years ago. There’s been a lot of risk in recent market conditions, so building stability into a portfolio, combined with potential for growth, needs a lot more research and competing viewpoints to come up with excellent solutions and strategies.” Hamid sees his greatest business success as the long-standing relationships he has created with his clients. “It’s amazing how I’ve
seen them evolve throughout the years from parents to now grandparents, or small startups to major companies,” he says. Going forward, Hamid’s goals include further developing his team, improving his practice’s portfolio management offering and enhancing the client experience. “We are now implementing state-of-the-art technologies that will help us reach this goal,” he says. “We believe it will translate into better investment behaviours and help increase overall net worth. We want to help our clients to have peace of mind, to have the freedom to do more of the things they love and less of what they don’t.”
FAST FACTS: NADER HAMID Practice: Total Wealth Management Group Firm: HollisWealth, a division of Industrial Alliance Securities Location: Pointe-Claire, QC Years in the industry: 17 Education: Bachelor of commerce from McGill University Certifications: CFP, CIM, FCSI Team motto: “Health, wealth and happiness”
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SPECIAL PROMOTIONAL FEATURE
PRIVATE DEBT
Tapping into private debt Centurion Asset Management shines a light on a sector that’s offering investors equity-type returns with the reduced volatility of debt
AS MAJOR financial institutions have tightened their standards for lending, private debt has become more popular among fund providers and is gaining traction with investors. Private debt can refer to any type of non-prospectus loan, such as mortgages, accounts receivable (like factoring), mezzanine loans, royalty financing and lease finances, and can go to either public or private companies. According to Greg Romundt, president and CEO of Centurion Asset Management, the opportunity in the space has never been greater than in recent years. “The sector has grown dramatically since the global financial crisis,” he says. “Many businesses that previously could have accessed
the banking sector for credit now have to turn to the private credit market. With the increased regulatory burden, fewer business find it attractive to be public today, which was not previously the case. Studies have shown the number of public companies is lower today than it was years ago. There just has not been a surge of brand-new companies.” Romundt adds that big companies going public, like Facebook and Google, get considerable attention. However, these cases don’t represent the vast majority of companies trying to grow and access capital. The combination of tighter lending standards and the desire to remain private has fuelled the growth of the private debt sector.
Ontario 43.7% Florida 21.0%
CFIT INVESTMENTS BY GEOGRAPHY
British Columbia 19.0% Manitoba 5.9% Alberta 5.3% Texas 3.0% Michigan 1.0% Saskatchewan 0.6% Nova Scotia 0.5%
Source: Centurion Asset Management CFIT Annual Report 2018
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As demand has grown, the private debt sector has performed consistently, Romundt says, but it’s also had its challenges. “You don’t get paid the rates of interest in this industry that you do without having to occasionally roll up your sleeves and work on a file,” he says. “Aside from doing the due diligence of going into a file, sometimes it’s about your sector selections. That’s one of the things about private debt – it’s very hands-on.” Accordingly, Romundt and Centurion are hands-on with Centurion’s private debt fund, Centurion Financial Trust (CFIT). “What we have found is that most private debt funds focus on a particular area, like real estate mortgage lending, factoring, leasing, royalties or preferred shares, but really, when a company is looking for capital, they don’t know what structure they need,” he says. “They know they have a need for capital at a certain term with certain features. We consider ourselves financial solution providers to our clients. In our risk-return profiles, we are very structure agnostic, so what we’re trying to do is help borrowers access capital with structures that make sense for them. We try to be flexible to solve their issues.” Centurion’s diverse approach has helped CFIT do well in its first three years, averaging returns in the low teens. “We think that’s pretty good in a world where bond yields are early single digits,” Romundt says. He notes that CFIT has the flexibility to move in and out of certain weightings between real estate and corporate debt. “If we think there is more opportunity in real estate, we will be in real estate,” he says. “If the opportunity is in corporate debt, that’s where we will be. It gives us the flexibility to move in and out of sectors, depending on the demand and availability of opportunities.” Romundt sees three primary benefits of investing in private debt. “First, the returns tend to be higher because you are being paid for that illiquidity and lower transparency, very often with smaller or mid-sized companies,” he says. “Second, returns are generally uncorrelated to the equity market. And third, we have
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CFIT INVESTMENTS
Real estate 69.4% Corporate 30.6%
Real estate by type
“The sector has grown dramatically since the global financial crisis. Many businesses that previously could have accessed the banking sector for credit now have to turn to the private credit market”
Mortgages 61% Participating mortgages 20% Equity 19%
Corporate debt by type
Greg Romundt, Centurion Asset Management found that returns can be closer to equitytype returns, but with a risk profile closer to debt. We find that to be attractive.” Illiquidity and transparency are a couple of the risks associated with the sector. Since borrowers are coming to the sector to get access to credit they can’t get somewhere else, they may not be able to pay back what has been borrowed in a specific timeframe, which could affect investors. Another area of potential risk is portfolio concentration. Romundt compares a private debt fund to a bank doing a large number of mortgages – while the bank might have many loans out, a private debt fund can be constructed on far fewer, making it more concentrated. However, he adds, these risks are why
investors get paid more for these types of opportunities – and he doesn’t see such opportunities going away anytime soon. “We are not only seeing strong demand from borrowers, but also demand from investors as they become familiar with the asset class and look to diversify their portfolios and generate income,” he says. “This sector was predominantly institutional, but more and more it is gaining traction not only with high-net-worth investors, but a broader base as well.” Currently, private debt isn’t seeing large allocations from the majority of investors and advisors, which Romundt believes is due to the previous lack of access, as well as a lack of knowledge about the sector. Still, he believes private debt can and should have a place in portfolios.
Corporate debt 80% Convertible debt and warrants 20%
Source: Centurion Asset Management CFIT Annual Report 2018
“We think that private debt can perform well throughout the economic cycle, providing equity-like returns with debt-like levels of volatility,” he says. “In today’s low interest rate world, with stretched equity market valuations, the returns offered are attractive, and the downside seems to be better protected than straight equity.”
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PEOPLE
CAREER PATH
SEIZING THE DAY
Whether she’s in a uniform or a power suit, Emily Ben-Haim brings an intrepid attitude to everything she does Joining the Israeli military immediately after high school, Ben-Haim was selected to work for the general chief of staff. “The military was a great place to start my career – my position ingrained within me responsibility, adaptability and decision-making under pressure. It gave me perspective. The invaluable lessons I learned during my service have remained with me to this day.”
2002 JOINS THE MILITARY
2009 ENTERS CORPORATE AMERICA After earning her undergraduate degree at night while working full-time, Ben-Haim set her sights on corporate America. Out of nearly 3,000 applicants, she was one of the top 3% offered a position in Morgan Stanley’s analyst program.
“My favourite part of the job was speaking with hedge fund managers; I realized that I loved interacting with people too much to be stuck behind a screen with spreadsheets all day” 2014 OBTAINS HER MBA Ben-Haim again found herself burning the midnight oil to pursue her MBA, attending night classes at NYU while working full-time at JP Morgan during the day. Her effort paid off when she was given the opportunity to relocate to London and work on the investment bank’s trading desk. “After 10 years in New York City, I decided to move to London – it was another special opportunity I had to seize.”
2016 JOINS GLUSKIN SHEFF Ready for a new challenge, Ben-Haim headed back to North America, armed with a recommendation from a former New York co-worker. “A colleague from New York told me, ‘If you move to Canada, you have to work for Gluskin Sheff.’ I was impressed by Gluskin Sheff’s stellar reputation and exceptional client service – I immediately knew that I wanted to be a part of their great team.” 46
2004
MOVES TO NEW YORK CITY After she completed her military service, Ben-Haim was sitting at a traffic light when she received a phone call offering her an opportunity in the Israeli government’s Manhattan-based Defense Ministry. “She said, ‘I need you here in a week – I need an answer now.’ I’d always rather seize the opportunities than say no and wonder. I arrived a week later with two suitcases, barely in my 20s, knowing no one.”
2010
TRANSITIONS INTO WEALTH MANAGEMENT Ben-Haim found an open door into wealth management when JP Morgan reached out with a life-changing offer. “They contacted me out of the blue and asked if I would be interested in moving into wealth management, which I certainly was. Wealth management is fundamentally based on forming lasting, trusting relationships with people. Although the learning curve was challenging, it was a rewarding experience and a great privilege to be a part of the team.”
2013
STARTS FROM SCRATCH For the second time, Ben-Haim started over in a new city on a new continent. Her new job put her in the middle of Europe’s largest trading floor, spread out over three floors with 1,000 people on each one. “The position was mentally and physically demanding – I was unable to leave my desk when I was trading. I sat behind six screens, and everything was timesensitive. I was given the opportunity to move to sales and trading, which was the best of both worlds – high finance combined with human interaction.”
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PEOPLE
OTHER LIFE
TELL US ABOUT YOUR OTHER LIFE Email editor@wealthprofessional.ca
Setup time for each ride – which includes pu mping up the kite a nd ensuring no lines are ta ngled – ca n take up to 20 minutes
GO FLY A KITE
Kitesurfing takes fintech CEO Trevor Gary up, up and away from the daily pressures of the financial industry MICRUITY CEO Trevor Gary spent his childhood sailing, so he was accustomed to harnessing the wind to “go fast and have fun.” That, combined with his background as a competitive snowboarder, worked to his advantage when he was corralled into trying kitesurfing by a family member five years ago in the Dominican Republic. “Everything went right,” Gary says of his initial experience. “I was able to launch out of the water, and the strangest thing happened – I didn’t have any control over my body. I got airborne and went into a spin, and it was a sensation I’d never had before. I had no control in the air.” Since that memorable first experience, the adrenaline rush has kept Gary coming back to the sport. Luckily, conditions at the family cottage lend themselves to kitesurfing, and on a gusty day, it’s not uncommon for him to spend hours out on the water.
5
Number of kites Gary and his family own
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$400
Amount Gary’s first kite cost
16–17
Wind speed (in knots) of Gary’s fastest flight
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WP al
CANADA
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COMPETITIVE IN EVERY WAY. MACKENZIE ETFs ACTIVE STRATEGIC BETA TRADITIONAL INDEX
At Mackenzie Investments, we deliver quality, choice and relevance through a comprehensive suite of ETFs. LET’S WORK TOGETHER. TALK TO YOUR MACKENZIE REPRESENTATIVE TODAY. mackenzieinvestments.com/ETFs
BUSINESS AND TAX PLANNING SUPPORT PORTFOLIO CONSTRUCTION TOOLS AND TRAINING INVESTMENT SOLUTIONS FOR EVERY LIFE STAGE Commissions, trailing commissions, management fees and expenses all may be associated with investment funds. Please read the prospectus before investing. Investment funds are not guaranteed, their values change frequently and past performance may not be repeated.
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